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Annual Report and Accounts 2020
Building for the future
Getting the
fundamentals right
The Covid-19 pandemic has acted as a catalyst for
change in our business and has provided the
opportunity to accelerate some of our strategic initiatives
to strengthen the core of the business and position us
well for the future.
The impact of the pandemic meant that our 2020
financial performance was lower than in 2019, but
we have demonstrated great resilience.
Getting it right for our:
Colleagues, customers,
suppliers and
shareholders
Customers - see page 16
Strategy - see page 18
Suppliers - see page 65
Colleagues - see page 66
Other information
www.travisperkins.co.uk
www.toolstation.com
www.benchmarxkitchens.co.uk
www.bssindustrial.co.uk
www.ccfltd.co.uk
www.keyline.co.uk
www.wickes.co.uk
www.cityplumbing.co.uk
www.theunderfloorheatingstore.com
Travis Perkins plc Annual Report and Accounts 2020
Travis Perkins plc Annual Report and Accounts 2020
1
1
Financial statementsGovernanceStrategic report What’s in our report
Strategic report
Governance
Financial statements
Other information
3
75
121
189
Strategic report
Financial performance
3
At a glance
4
Chairman’s statement
6
Chief Executive’s report
8
12
Investment case
14 Market dynamics
16 Business model
18 Our ambition & strategy
24 Strategy in action
26 Key performance indicators (KPIs)
28 Business performance and priorities
32 Merchanting
34 Plumbing & Heating
35 Toolstation
36 Wickes highlights
40 Financial performance
44 Statement of principal risks and
uncertainties
52 Sustainability overview
71
Section 172 statement
73 Non-financial information statement
Governance
76 Board of Directors
78 Chairman’s introduction
79 Corporate governance report
84 Nominations Committee report
87 Audit Committee report
93 Directors’ Remuneration report
97 Remuneration Policy report
105 Annual Remuneration report
117 Directors’ report
119 Statement of Directors’ responsibilities
Financial statements
122
Independent Auditor’s report
131 Consolidated income statement
131 Consolidated statement of
comprehensive income
132 Consolidated balance sheet
133 Consolidated statement of
changes in equity
134 Consolidated cash flow statement
135 Notes to the consolidated financial
statements
179 Company balance sheet
180 Company statement of changes in equity
181 Notes to the Company’s financial
statements
Other information
190 Five-year summary
192 Other shareholder information
Throughout the Strategic Report, and consistent with prior years, alternative performance measures (“APMs”) are
used to describe the Group’s performance. These are not recognised under IFRS or other generally accepted
accounting principles (“GAAP”). The Board manages and assesses the performance of the business on these
measures and believes they are more representative of ongoing trading and facilitate meaningful year-on-year
comparisons and hence provide useful information to shareholders. APMs are defined in the notes to the financial
statements and reconciled to the closest GAAP measure.
2
Travis Perkins plc Annual Report and Accounts 2020
Financial performance
Other information
Like-for-like revenue
(7.1%)
2019: 3.8%
Adjusted EPS
42.4p
2019: 112.7p
Return on capital employed
5.5%
2019: 10.1%
Revenue
£6,158m
2019: £6,956m
Adjusted operating profit
£227m
2019: £442m
Covenant net debt
£40m
2019: £344m
Loss after tax
£22m
2019: profit after tax £123m
Operational highlights
– Continued progress on strategic agenda
across digital enablement, customer
fulfilment, process simplification and
branch network rationalisation despite the
challenges of Covid-19
– Toolstation’s strong outperformance of the
market maintained with like-for-like growth
of 22.2%. Branch rollout continues at pace
in the UK and Europe
– Robust second-half recovery in
Merchanting and P&H driven by repairs,
maintenance and improvement demand
– Wickes taking market share with
like-for-like growth of 5.5%. Demerger
process recommenced
Travis Perkins plc Annual Report and Accounts 2020
3
Financial statementsGovernanceStrategic report At a glance
Travis Perkins is the largest distributor of building materials
and products in the UK, serving a broad range of end
markets from generalist to specialist propositions in the
building, construction and home improvement markets
Large and varied
customer base
Broad geographical
spread in the UK
Engaged colleagues in
the UK and Europe
Mature branch
network
200k
Trade credit customers
£6.2bn
Revenue
29k
Colleagues
1,976
Branches
Our key brands
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Travis Perkins plc Annual Report and Accounts 2020
543 branches
5,400 colleagues
£0.6bn revenue
846 branches
11,700 colleagues
£3.1bn revenue
354 branches
3,500 people
£1.1bn revenue
233 branches
8,300 colleagues
£1.4bn revenue
Strategic report
Governance
Financial statements
Other information
Other information
The Group’s strategic aim is to deliver best-in-class
service to trade customers, through businesses
with clear competitive advantages and
strong, market-leading positions
Focus on the trade
One of Europe’s fastest growing suppliers of tools, accessories
and building supplies to trade and DIY customers, through a
market-leading multi-channel offering
The UK’s largest network of builders merchants, supplying
building materials, tool hire and kitchen products to trade
customers ranging from sole traders to national housebuilders
Suppliers of specialist solutions to main contractors and
subcontractors in the residential, infrastructure, commercial and
industrial construction sectors
An integrated branch network with online capability supplying installer
and contract customers with an extended range of plumbing and
heating products, including its successful own-brand ranges
Digitally-led, service-enabled, home improvement business,
with sales split almost equally between DIY, small trade
customers and installed Do It For Me projects
Regional split
● South-East: 31%
● North & Scotland: 25%
● Midlands: 24%
● Wales and South-West: 20%
Product mix
Plumbing & heating: 36%
Heavyside: 32%
Lightside: 19%
Timber: 13%
Distribution
Collect: 40%
Deliver: 60%
Cash or credit
Cash: 40%
Credit: 60%
Travis Perkins plc Annual Report and Accounts 2020
5
Financial statementsGovernanceStrategic report Chairman’s statement
“I am enormously proud of the role the
Group has played and the attitude
shown by our colleagues in responding
to the Covid-19 pandemic. This resilience,
driven by the values we hold, will stand
the Group in good stead for the future”
Stuart Chambers
Chairman
Covenant net debt
£40m
2019: £344m
Return on capital employed
5.5%
2019: 10.1%
6
Travis Perkins plc Annual Report and Accounts 2020
Introduction
It is with great pleasure that I introduce the
Annual Report for the Group for the year
ended 31 December 2020. As I prepare to
hand over the Chair to Jasmine Whitbread at
the end of March it brings the opportunity to
reflect back on what has been an
extraordinary year for all of us. The most
important message I wish to convey is one of
sincere gratitude for the commitment and
energy that all the people across the Travis
Perkins Group have shown in responding to
the challenges of the Covid-19 pandemic and
in playing their vital part in keeping the
construction industry supplied. I am
enormously proud of the role the Group has
played and the attitude shown by our
colleagues and I firmly believe that this
resilience, driven by the values we hold, will
stand the Group in good stead for the future.
Performance
The safety of everyone who interacts with us,
most often our colleagues, customers and
suppliers, is of paramount importance to the
Group. In 2020 we faced the challenge of
working safely whilst adapting to the
requirements of Covid-19 and amended our
business models. This has been difficult, with
the five fatal accidents involving our
businesses providing a stark reminder of the
risks we can generate for ourselves and
others. Whilst there have been areas of
important progress, it is clear to me that in
2020 we did not always meet the high
standards we set for ourselves and are rightly
thoughtful about how we can improve our
safety performance.
In a year of considerable uncertainty
containing two lockdowns the Group
produced a creditable performance. Total
Group revenues were down 11% but this
masks significant progress in many areas
driven by digital innovation and strong
customer propositions in both the DIY and
the trade home improvement markets.
On a statutory basis operating profit reduced
to £77m (2019: £232m) reflecting the costs
of the restructuring programme necessitated
by the pandemic. Adjusted operating profits
decreased by 49% to £227m, with all
businesses impacted, although Wickes and
Toolstation delivered highly resilient
performances due to their digitally enabled
business models and exposure to the DIY
and local trade market segments.
Strategy
In March 2020 we announced the
postponement of the Wickes demerger
process due to the Covid-19 pandemic. This
was unavoidable but, due to the hard work
and the advanced state of preparedness of
the process, the Group is confident that this
can be successfully concluded in April 2021.
Wickes is in excellent shape to prosper as a
stand alone business and the demerger is
consistent with the strategic agenda
announced in December 2018 for the Group
to focus on majority-trade businesses.
The Board and Executive leadership team
have considered carefully the potential
changes to the construction and distribution
industries and are developing a strong
agenda to maintain the leading positions of
our advantaged trade focused businesses.
The Group has also focused on the shorter
term “Strengthening the Core” phase,
particularly on IT and digital development.
The staged modernisation of core IT systems
has the potential to unlock significant
opportunities for the Group and therefore
remains a key priority.
Board and Leadership
Given the postponement of the Wickes
demerger process, I was delighted that Chris
Rogers was able to serve for an additional
year on the Board of Travis Perkins. He will
step down at the 2021 AGM to take up the
Chairmanship of Wickes plc and once again I
would like to thank him for his seven years of
service on the Travis Perkins Board.
In March 2020, Pete Redfern stepped up to
the role of Senior Independent Director
following six years’ service on the Board. I am
confident that Pete’s experience will be
invaluable to Jasmine as she takes over as Chair.
In addition, John Rogers has taken over as
chairman of the Audit Committee and Pete
Redfern, Marianne Culver and Blair
Illingworth joining the Audit, Remuneration
and Stay Safe Committees respectively.
Furthermore, Blair assumed chairmanship of
the Stay Safe Committee from 1 January 2021.
In 2020, Nick Roberts also announced that
he was broadening the membership of the
Group Leadership Team (“GLT”) to include
the operational leaders of each major
business unit. This is a significant move to
ensure connectivity and enhance
collaboration between business and
functional leaders across the Group.
Dividend
The Group has maintained a consistent
approach to its dividend policy over many
years. However, it was inevitable that the
Covid-19 pandemic should force the
prioritisation of cash management to the top
of the agenda. The Board recognises the
importance of dividend distributions and
intends to reinstate dividend distributions in
2021, assuming there is no further
deterioration in the external environment.
Summary and looking forward
As I prepare to step away, I am delighted to
be able to hand over a Group that is in good
shape to continue to grow and prosper. The
underlying markets which we serve remain
fundamentally strong and, whilst the path
back to full recovery is hard to predict
accurately, there are enough indications to
build confidence that the construction sector
will recover quickly and grow over the course
of the economic cycle. With Brexit finally
settled and a path out of Covid-19 becoming
clearer, the need to build and update
residential dwellings and to invest in
infrastructure development provides a route
back to sustainable growth. The Group is well
placed to capitalise on these opportunities
and, whilst we retain a cautious outlook in the
near term, the delivery of the initiatives within
our gift will support market outperformance
and value growth over the medium term.
Other information
Driven by our values –
reshaping our purpose
Cornerstones
Our values - the Cornerstones - are
the foundations of culture and life in
Travis Perkins Group. They shape the
way we think and act and our conduct
towards colleagues, customers and
suppliers.
– Upholding family values
– Keeping people safe
– Making decent returns
– Working for our customers
– Being the best
Through Covid-19 the Cornerstones
have acted as our guide, showing us
the way and pointing to where we
must try harder.
Purpose
We are currently at work reshaping our
purpose and look forward to sharing
this over the course of 2021. It will
contain the elements that make the
Group what it is today:
– Our heritage, proudly serving
customers since 1797
– Our values
– Our trade focus
– Our commitment to sustainability
and net zero carbon in 2035
– Our experiences from the Covid-19
pandemic, helping keep the nation
warm, dry and secure
– Our ambition and where we want to
take the Group
These factors are embedded into the
fabric of our Group, they make us
what we are and will help us become
who we want to be.
Travis Perkins plc Annual Report and Accounts 2020
7
Financial statementsGovernanceStrategic report Chief Executive’s report
“I reflect on 2020 with great pride
in the commitment, professionalism
and tenacity of all our colleagues
across the Group and their
determination to support our
customers, suppliers and the
communities.”
Nick Roberts
Chief Executive Officer
Revenue
£6,158m
2019: £6,956m
Adjusted operating profit
£227m
2019: £442m
8
Travis Perkins plc Annual Report and Accounts 2020
Introduction
As I reflect on perhaps the most challenging
year in our history I do so with great pride in
the commitment, professionalism and
tenacity of all our colleagues across the
Group. Their determination to support our
customers, suppliers and the communities
which we serve throughout the pandemic has
ensured the nation’s critical infrastructure has
remained operational and our homes safe,
warm and dry at a time when we needed it
most. Furthermore, the courage of all
colleagues through successive periods of the
pandemic has enabled the construction
industry, a vital part of the national economy,
to continue safely.
Despite the challenge of 2020, I am proud of
the resilient performance we have delivered
across our Group. We have shown great
agility and versatility in adapting our working
practices and operating models, providing
new channels through which to serve our
customers and reshaping our businesses to
suit the changing demands of our markets.
Safety
The Group’s safety culture has been
carefully developed over many years, is
represented clearly in our values and is a
source of pride to our colleagues. This
aspect of our culture ensures that the safety
and well-being of our colleagues remains
our top priority, and it guided, especially
through the ongoing pandemic.
We are highly conscious that as our operating
models and ways of working changed, the
risk profile of our activities also changed.
Colleagues and customers were focused on
moving and working differently and were
distracted and fatigued by managing the
impacts of Covid-19. This resulted in an
increase in injuries and a total of five fatalities
during the year which are associated with the
operations of our businesses. This is an
unacceptable position to all of us and one
which is driving careful consideration of our
safety culture and our ability to provide a safe
environment irrespective of the conditions
under which we operate. This is and will
remain an area of focus over the years ahead.
Working in partnership
The pandemic required a national effort to
ensure the safety and well-being of everyone
in society, with building material merchants
and distributors playing a vital role in
ensuring our communities remained safe,
warm and dry. As an industry leader we
worked closely with the UK Government, the
Builders Merchants Federation and the
Construction Leadership Council to ensure
that safe working practices and protocols
were developed at pace for the construction
industry, enabling activity to continue during
the pandemic. We also worked closely with
our communities to support existing medical
and community facilities and enable the
construction of temporary facilities that aided
the vulnerable.
Our place in society
Whilst it was appropriate to focus our efforts
on ensuring the safety and well-being of our
colleagues, customers and suppliers during
the year as we navigated the challenges of
the pandemic, we also progressed our
broader Environmental, Social and
Governance (“ESG”) agenda which ensures
that we continue to be a responsible and
leading employer upholding the values for
which we are known.
We developed and launched a new Code of
Conduct and implemented policies and
minimum standards to support the Group’s
businesses diversity and inclusion, people
development, sustainable products and
services and responsible sourcing.
We have set the objective of being net zero
carbon by 2035 for Scope 1 and 2 emissions,
and by June 2021 we will set a target for
reducing Scope 3 indirect emissions from the
creation and use of our products.
Staying close to our colleagues in a year
where we were forced to maintain a physical
distance was one of our top priorities. Our
weekly “check-in” surveys, with over 35,000
responses during the year, have given us
great insight and enabled us to support our
colleagues in the right ways, including
significant steps to protect mental health. We
have also enhanced our family leave policies,
as well as ensuring that our front-line
colleagues received pay increases and
recognition for their great work.
In a year that has been difficult for the
employment market, we have pushed on
with our apprenticeship programmes, taking
on 783 apprentices and plan for an
additional 1,000 in 2021. All of these
changes will help us build a more diverse
workforce for the future.
Restructuring the business
From late March to summer 2020, the
Group’s performance was significantly
impacted by the Covid-19 pandemic. Faced
with ongoing disruption and uncertainty, we
took the tough but necessary decision to
deliver a major restructuring programme to
accelerate planned network changes and
reduce the Group’s cost base. The recovery in
the second half of the year has been
extremely encouraging and has
demonstrated the agility and resilience of the
Group’s portfolio of businesses.
In keeping with our focus on simplifying the
Group’s structure and operating model, I
have made significant enhancements to the
Group Leadership Team (“GLT”) over the
year, with the goal of enhancing our capability
and talent as well as enabling agile decision
making, sharper operations and better
communication across the Group.
The simplified management structure meant
that the GLT was restructured to include all
operating company Managing Directors and
Frank Elkins was appointed to the new role of
Group Chief Operating Officer. We welcomed
new appointments to the GLT: Emma Rose as
Group HR Director, Catherine Gibson as CCF
MD, Dave Evans as Managing Director of our
Plumbing & Heating business, Dean Pinner
as Keyline MD and Phil Tenney as Group
Chief Information and Technology Officer.
Other information
Our year in review
Adjusted operating profit down
49% as the Group was impacted
by Covid-19 pandemic
Our digitally-enabled businesses,
Wickes and Toolstation, have
made significant market share
gains during the year
Toolstation rollout continues at
pace with 60 new branches in
2020
Tough but decisive actions taken to
restructure the business that have
accelerated planned network
changes
Strong second-half recovery after
the disruption of the initial
lockdown. Merchant and Plumbing
& Heating businesses have shown
their resilience
Wickes demerger recommenced
and aiming for completion in
Q2 2021
Portfolio simplification continues
with the sale of Primaflow F&P
and Tile Giant
Regular Twitter
updates to keep
our customers
informed and
connected
Travis Perkins plc Annual Report and Accounts 2020
9
Financial statementsGovernanceStrategic report Chief Executive’s report continued
“Our colleagues’ determination to
support the customers, suppliers and
communities we serve throughout the
pandemic has ensured the nation’s
critical infrastructure has remained
operational and our homes safe, warm
and dry at a time when we have needed
it most.”
Progress against strategic initiatives
Although operational efforts have been focused on managing the
implications of the pandemic, our teams have also been able to
make excellent progress on a number of key initiatives supporting
our strategic objectives of simplifying the Group and focusing on
our trade customers.
Wickes demerger
I am pleased to be able to confirm that the process to demerge
has recommenced with the aim of completing in Q2 2021. The
Wickes digitally-led model has proved highly effective during the
pandemic and the business is in great shape to embark on its
journey as a standalone entity.
Toolstation delivered another outstanding performance,
providing further evidence of the strength of the customer
proposition. Changes during the year to rapidly increase the
capability of both the IT infrastructure and the distribution
operations demonstrated the agility of the model and provided
further encouragement to push on with the rollout of the
Toolstation model with 60 new branches in the UK and 17
more across France, Belgium and the Netherlands.
Outlook
The long-term fundamentals of the Group’s end markets remain
robust as a result of ongoing demand for new housing and the
underinvestment in the repair, maintenance and improvement of
the existing UK housing stock. This is further underpinned by the
UK government’s adoption of stimulus measures such as Green
Homes Grant schemes and Help to Buy, plus longer term
commitments to infrastructure investment.
End markets recovered well during the second half of 2020 with
robust RMI activity outstripping a lag in the commercial and
housebuilding sectors. Performance to date in 2021 has followed
a similar trend despite the stricter lockdown conditions.
The Group continues to focus on strengthening its core business
and investing to develop a modern merchanting proposition that
will leave the Group well placed to continue to outperform its
markets and generate value for shareholders.
The Merchant businesses, despite substantial disruption from the
initial lockdown, were able to make good progress on strategic
plans, particularly around simplifying commercial structures and
refining our pricing architecture, which will drive future benefits.
Our new delivery management system, which is rolling out across
CCF, Keyline and Travis Perkins, will both optimise route planning
and also enable our customers to track their deliveries.
We successfully developed new digital capabilities and deployed
tools to help our customers secure the materials they need and to
help our colleagues efficiently run their operations. Clearly this is
an area of huge potential and will rightly require our ongoing focus
and investment.
We have also taken further steps to simplify the Group’s portfolio
of businesses with the sales of both Primaflow F&P and Tile Giant
during the year. It remains our intention to sell the Plumbing &
Heating business when market conditions are supportive but in
the meantime our focus is on improving the business.
10
Travis Perkins plc Annual Report and Accounts 2020
Other information
A year like no other for our customers
“Customers still want their
work doing, which as builders
we can do by social
distancing, but if our suppliers
are closed we can’t”
“If the construction sector can
remain strong it will breed
confidence across other
sectors. Historically if the
construction sector is
performing well the country’s
economy is performing well”
Travis Perkins customer
Keyline customer
Travis Perkins plc Annual Report and Accounts 2020
11
Financial statementsGovernanceStrategic report Investment case
Building on solid
foundations
The Covid-19 pandemic has acted as a catalyst for
change in the Group’s business and has provided the
opportunity to accelerate some of the Group’s
strategic initiatives to strengthen the core of the
business and position the Group well for the future.
The impact of the pandemic meant that the Group’s
2020 financial performance was lower than in 2019,
but the Group demonstrated great resilience.
A strong balance sheet and less
complicated Group enables
disciplined investments in high
return businesses.
The Group generates strong
sustainable cash flows, which have
proved to be robust during the
recent economic uncertainty.
The fundamental long-term
market drivers remain strong
despite short-term uncertainty
caused by Covid-19. The UK
continues to under-invest in
building new homes and
maintaining existing homes.
The Group operates in highly
fragmented markets with over
50% market share held by small,
independent businesses.
The Group’s businesses all hold
#1 or #2 positions in their markets
with growth in most businesses
outperforming their end markets.
12
Travis Perkins plc Annual Report and Accounts 2020
Other information
Travis Perkins plc Annual Report and Accounts 2020
13
Financial statementsGovernanceStrategic report Market dynamics
The Group serves
all areas of the
construction market
270,000
Projected annual demand
for UK homes
90,000
UK home-building
shortfall
Residential
Commercial
Infrastructure
New build
UK housing demand continues to
outstrip supply with an annual
shortfall of c. 90,000 homes.
Repair, maintenance
and improvement
(“RMI”)
The average UK home is 70 years
old and housing stock is relatively
poorly maintained.
Commercial buildings are needed
to drive growth in a modern
economy. Investment in new
commercial buildings and
refurbishment of existing stock will
increase as the economy recovers.
Demand for major infrastructure (rail,
airports, power stations,
communication networks and
utilities) remains strong with
investment planned in many areas.
Market segmentation
Route to market
Merchant
Fixed price
Specialist merchant
Direct to site (distributed product
categories)
Retail
Pure play online
2019
22%
5%
28%
19%
22%
4%
Plumbnation
Underfloor Heating Store
National Shower Spares
Wickes
Current conditions: residential
Residential acts as a lead indicator for over half of Group revenues
Travis Perkins
Toolstation
BSS | CCF | Keyline | CPS |
PTS | Benchmarx
Housing transactions are expected to return to pre-pandemic levels by 2023
• Macroeconomic uncertainty has impacted consumer confidence leading to considered big ticket purchases
• Strong Government fiscal stimulus, particularly in RMI
UK annual housing transactions
2017
2018
2019
2020
14
Travis Perkins plc Annual Report and Accounts 2020
Other information
Travis Perkins plc Annual Report and Accounts 2020
15
Financial statementsGovernanceStrategic report Business model
Strong and lasting customer and supplier relationships,
combined with the strength of Travis Perkins’ network
and unique culture allow value creation and growth in
a self-reinforcing cycle
Inputs
Competitively advantaged
resources and relationships
Customers
What we do
Collaborative value chain
Resources
Suppliers
Deep customer
relationships and
understanding of needs
– Nationwide branch network,
embedded in communities
– 29,000 engaged colleagues, and
a unique and open culture
– Industry leading supply chain
– Strong balance sheet
– Disciplined capital allocation
– 200+ year heritage and
businesses that are #1 or #2 in
their market
Deep and lasting
supplier relationships
with ability to connect
to customers across
the country
Underpinned by
Responsible and sustainable approach
For more information see page 52
16
Travis Perkins plc Annual Report and Accounts 2020
Other information
Outputs
Self-reinforcing model
generating growth and
value for stakeholders
R
e
q
u
ir
e
m
e
n
t
s
• Collaborate,
specify & quote
• Negotiate,
convert & sell
• Range & source
• Assort & procure
• Fulfil, collect,
deliver
Products and Services
• Fulfilled customers
• Engaged colleagues
• Enriched communities
• Satisfied shareholders
• Valued suppliers
Sound corporate governance
For more information see page 75
Robust risk management
For more information see page 44
Travis Perkins plc Annual Report and Accounts 2020
17
Financial statementsGovernanceStrategic report
Our ambition & strategy
Two major strategic themes:
Simplify
the Group
Positioning the Group for
enhanced returns and
long-term growth
Focus on the trade
Developing businesses that
are well placed to win in
their markets
Four strategic priorities
Simplify the Group
Focus on the Trade
Successfully demerge the
Wickes business
Regenerate Travis Perkins
General Merchant
Accelerate the expansion of the
Toolstation business, in the UK
and overseas
Deliver an organisational platform
fit for the future
18
Travis Perkins plc Annual Report and Accounts 2020
Strategic report
Governance
Other information
Simplify the Group
Positioning the Group for enhanced
returns and long-term growth
Rationale
Up to 2018 the Group had grown and become more complex. Sales growth
had not translated into profit growth and costs had grown too quickly.
Significant investments had been made which were not suited to a lower
growth market and capital allocation was challenging. The Group needed to
become simpler with three clear aims:
1. More focused capital allocation
2. Faster decision making
3. Overhead cost reduction
What have we done?
Disposed of P&H wholesaler PF&P (January 2020)
Disposed of retail-focused Tile Giant (October 2020)
Made significant progress in reducing operational complexity
through simplification of commercial terms and processes
Successfully reduced overhead costs
What have we left to do?
During 2020 the Group placed the planned demerger of Wickes on hold
in order to focus on managing the Group through the pandemic and
maximise liquidity. This process has restarted in the first half of 2021
It remains the intention of the Group to sell the P&H business,
whilst in the short term continuing to drive operational
improvements to improve returns further and to optimise
value for shareholders
Travis Perkins plc Annual Report and Accounts 2020
19
Financial statementsGovernanceStrategic report Our ambition & strategy
continued
Focus on the trade
Developing businesses that are well
placed to win in their markets
Rationale
The heritage and heartland of the Group is serving
UK trade customers and this represents the majority
of the Group’s activity today
Trade-focused market sectors continue to see the
largest share of industry growth with more resilient
margins and a more predictable business cycle
Trade customers demand competitive prices but still
recognise the value of innovative solutions and will
use partners that can offer this
The Covid-19 pandemic
has created an inflection
point in customer
behaviour. The Group
has used this time to
accelerate its plans:
Today
A portfolio
of leading
merchants
20
Travis Perkins plc Annual Report and Accounts 2020
Strategic report
Governance
Other information
Strengthen
the core
Future of a
trade-focused
group
Get the fundamentals right
Regenerate the Travis Perkins
General Merchant
Accelerate growth of
Toolstation in the UK & Europe
Implement an organisational
platform that is fit for the future
Begin to digitise trade journeys
Reshape network for the future
Digital enablement
Leading advantaged
customer propositions
Revised customer
channels
Leverage of scale and
market share
Servicing modern
methods of construction
Travis Perkins plc Annual Report and Accounts 2020
21
Financial statementsGovernanceStrategic report Our ambition & strategy
continued
Digital
enablement
The Group has made significant
progress in 2020 towards digitising
key journeys and building tools to
help customers and colleagues.
Initially focused on the General
Merchant business these build on
the existing and high levels of digital
engagement enjoyed by the Wickes
and Toolstation businesses.
Customer app
• View account balances
• View and pay invoices
• View credit notes
• View statements
• Shop with your prices
• Check branch stock
• Branch finder
Colleague App
• Workflow management on
orders collected in branch
• Goods in management
• Stock counting, enhancing branch
stock accuracy
What this means for customers:
Placing control of their business in the palm of their hand.
Growth in visits to
travisperkins.co.uk in 2020
40%
22
Travis Perkins plc Annual Report and Accounts 2020
Other information
Customer
fulfilment
High quality fulfilment of customer
orders remains the principal
service differentiator across Trade
businesses. This will be an area of
ongoing focus and will combine with
the digital enablement described
above to give better visibility and
more choice to customers.
A key part of the delivery of exceptional service in this area
is the development of the Delivery Management application.
This was deployed in the first Group business in late 2020
to facilitate safe and timely delivery to customers with
maximum transparency and efficiency. Key benefits are:
• Enhanced accuracy of delivery, in set time slots
• Real-time tracking of vehicles
• Electronic vehicle safety checks
• One device per vehicle
• Recording of site hazards
What this means for customers:
Real-time access to delivery status
Travis Perkins plc Annual Report and Accounts 2020
23
Financial statementsGovernanceStrategic report Strategy in action
Process
simplification
The Group took advantage of lower
transaction volumes and the availability
of key resource over the lockdown
period to make significant progress
in process simplification and in the
removal of some historic areas that
added complexity to our business.
Simplification of
cost price recording
High levels of rebate attached to certain
product categories are a historic feature
of the supply of building materials. They
add complexity to accounting processes
and reduce margin visibility. Working with
our suppliers the Group “netted out” over
50% of rebates to make processes more
straightforward.
Simplification of transfers
within the Group
A significant number of customers want
to trade with multiple companies across
the Group. It is our strategic intention to
make this easier for customers. To start
this process, the Group made significant
progress in removing barriers to trading
between Group businesses, which had
added complexity and made it harder to
serve customers.
Network
evolution
The Group made difficult but necessary decisions
over the course of 2020 to reduce capacity as
a result of the Covid-19 pandemic. However,
the closure of branches in the General Merchant
business was an acceleration of the strategic
direction previously highlighted which
emphasised the requirement for larger
and more capable branches.
642
General
Merchant
branches
83
Branches
closed
559
Current
branches
Exiting smaller sites and investing in larger sites leads to:
• Improvements in safe
• Increased delivery
working practices
capacity
• A more consistent and
complete proposition
• Improved stock depth
• More effective colleagues
24
Travis Perkins plc Annual Report and Accounts 2020
Other information
IT
modernisation
The Group has re-commenced the
journey towards modernising and
digitising our businesses and the
journeys of our customers
and colleagues.
The Group’s IT modernisation programme
is currently focused on three areas:
Foundations - starting
with core finance and
ledgers to ensure a
modern system of
records is available
throughout the Group.
Digital - to develop
the digitisation of key
journeys for customers
and colleagues.
Data - to ensure data is
secure, consistent, widely
available and generating
insights and actions
across the Group.
Finance
Foundations
Digital
Data
“We’re modernising
the Group’s technology
to set foundations for
future growth.”
Travis Perkins plc Annual Report and Accounts 2020
25
Financial statementsGovernanceStrategic report Key performance indicators (KPIs)
Operational
Adjusted operating profit*
Like-for-like sales
The Group tracks its
performance using two
operating KPIs, three financial
KPIs and two non-financial KPIs
that the Board believes are key
indicators of progress against the
Group’s strategic and financial
targets. In addition the Group
has a number of guidance
measures at a Group, segmental
and business level, details of
which are set out in the financial
performance section on
pages 40 to 43.
2020
2019
2018
2017
2016
£227m
£442m
£375m
£380m
£409m
2019
2018
2018
Definition (note 2a)
Profit before tax, financing charges and
income, amortisation of acquired
intangibles and adjusting items.
Reason
Operating profit is adjusted to exclude
non-trading items, such as adjusting 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.
(7.1)%
2020
2019
2018
2017
2016
3.8%
4.9%
3.3%
2.7%
Definition (note 1b)
Revenue growth adjusted for new
branches, branch closures, business
acquisitions and disposals and trading day
differences. Revenue included in like-for-
like is for the equivalent periods in both
years under comparison. Branches are
included once they have traded for more
than 12 months.
Reason
Like-for-like sales help management
monitor the performance trend of the
underlying business and gives a good
indication of the health of the business
compared to competitors.
26
Travis Perkins plc Annual Report and Accounts 2020
Other information
Financial
Leverage ratio*
2020
2019
2018
2017
2016
2019
2018
2018
Free cash flow
Return on capital employed*
2.8x
2020
2.5x
2.7x
2.7x
2.7x
2019
2018
2017
2016
£304m
£195m
£168m
£154m
£232m
2020
2019
2018
2017
2016
5.5%
10.1%
10.5%
10.7%
11.3%
2019
2018
2018
2018
Definition (note 25)
The ratio of net debt to earnings before tax,
interest, depreciation, amortisation and
adjusting items (“EBITDA"). The figure for
2018 and earlier is calculated as the ratio
of lease-adjusted net debt to EBITDA
adjusted for rent (“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 2.5x.
Definition (note 24)
Net cash flow before dividends,
freehold property purchases and
disposal proceeds, pension deficit
repair contributions, adjusting cash
flows and financing cash flows.
Reason
The Group needs to generate strong free
cash flows to enable it to invest, expand its
operations and pay dividends to shareholders.
Freehold investments are financed by
property disposals and enable the Group
to access the best property locations.
Definition (note 26)
Adjusted operating profit divided by the
combined value of balance sheet debt and
equity. The figure for 2018 and earlier is
EBITDA less 50% of property rent divided
by debt, equity and eight times annual
property rental expense.
Reason
This ratio allows management to
measure how effectively capital is used
in the business to generate returns
for shareholders.
Non-financial
Accident frequency rate
Carbon intensity
2020
2019
2018
2017
2016
5.6
5.6
7.5
7.7
8.9
2020
2019
2018
2017
2016
21.7
24.6
28.1
30.2
33.2
2019
2018
2018
2019
2018
2018
Definition
The number of lost-time incidents (“LTIs”)
per million hours worked.
Reason
Keeping people safe is the Group’s first
priority. This ratio allows management
to measure progress in ensuring
a safe workforce.
Definition
Total scope 1 and 2 carbon emissions
(tonnes of CO₂e) per £m of inflation-
adjusted sales.
Reason
The Group has a responsibility to take
action to prevent the worst impacts of
climate change. This ratio allows
management to measure progress in
the decarbonisation of our business.
* These KPIs were impacted by the adoption of IFRS
16 - Leases on 1 January 2019.
Travis Perkins plc Annual Report and Accounts 2020
27
Financial statementsGovernanceStrategic report Business performance and priorities
Business
performance
Total revenue from continuing
businesses returned to growth in H2,
demonstrating the resilience of the
Group’s business model
Adjusted operating profit of £227m
reflecting lower volumes partially offset
by actions to reduce operating costs,
including both short term controls and
acceleration of longer term plans,
coupled with appropriate government
support in the merchant businesses
Delivered £120m annualised cost savings
with the focus on strengthening the core
business by closing smaller, subscale
branches and delayering management
Net adjusting items of £140m including
a £121m charge relating to the
restructuring programme
Strong free cashflow generation with
covenant net debt reduced by £304m
to £40m and successful refinancing of
September 2021 bond
£m (unless otherwise stated)
Revenue
Like-for-like revenue (decline)/growth
Adjusted operating profit
Adjusted earnings per share
ROCE
Covenant net debt
Dividend per share
Operating profit
Total (loss) / profit after tax
Basic earnings per share
2020
6,158
(7.1)%
227
42.4p
5.5%
40
nil
77
(22)
(8.8)p
2019
6,956
3.8%
442
112.7p
10.1%
344
15.5p
232
123
48.9p
28
Travis Perkins plc Annual Report and Accounts 2020
Summary
After an encouraging start to 2020, the first lockdown in the spring
significantly disrupted both the Group’s trading and supply chain.
While the Group recovered well in the second half led by the domestic
Repairs, Maintenance and Improvement (RMI) market, overall revenue
in 2020 declined by 11.5% to £6,158m. Despite ongoing restrictions,
performance was encouraging, demonstrating the agility and
resilience of the Group’s portfolio of businesses.
Throughout the pandemic, the health and safety of our colleagues,
customers and suppliers has been our first priority. The Group
continues to work with all parties involved in the construction
industry, including government and trade bodies, to set standards
to maintain safe working practices and support the ongoing
recovery in the sector.
At the start of the initial lockdown in late March, the majority of the
Group’s businesses were closed and focus was solely on supporting
essential projects, such as the construction of the Nightingale
hospitals, with staffing reduced to a minimum to adhere to strict
safety guidelines. Wickes and Toolstation, due to their advanced digital
capabilities, were able to repurpose their branches as fulfilment
centres to support the local trade either via click and collect or home
delivery, although the Wickes showrooms business remained closed.
Through May and June, with the majority of the construction industry
now classified as essential and workers returning to building sites, the
Group’s businesses began to cautiously reopen, adapting operating
models to ensure compliance with Covid-19 safety requirements.
Revenues over the first half of the year were thus down by 19%.
The high growth in the DIY market, which started during the first
lockdown, has been sustained, benefiting Wickes and, to a slightly
lesser extent, Toolstation. The broader domestic RMI market also
recovered strongly, driven by the high number of housing transactions
and homeowners having both the resources and need to invest in
their properties as working from home has become far more
prevalent. The Group has, however, seen a slower return to activity in
new housebuilding and major commercial projects resulting from
fewer new projects starting.
With the Group overall well placed to benefit from the shape of the
recovery, underlying revenues from continuing businesses returned to
growth in the second half, up 1.4%*.
* Total Group revenue excluding Tile Giant and Primaflow F&P which were disposed of during
2020. Toolstation Europe is included as if fully consolidated for both 2019 and 2020.
Other information
Given the largely fixed cost nature of the Group’s branch network and
lower revenues, adjusted operating profit fell to £227m from £442m
in 2019. During the year, the Group utilised £74m of government
assistance in the Merchanting and Plumbing & Heating businesses. All
support initially received in Toolstation and Wickes, amounting to
£46m, was repaid due to their strong performance.
Taking into account £140m of adjusting items (principally resulting
from the business restructuring programme described below), the
Group delivered a statutory operating profit of £77m (2019: £232m).
Adjusted earnings per share fell to 42.4p per share (2019: 112.7p per
share). Basic EPS reduced to a loss of 8.8p per share, with the
difference primarily driven by the costs of the restructuring
programme.
Cash generation during 2020 was extremely strong, reflecting the
Group’s focus on liquidity management throughout the pandemic.
Dedicated focus on working capital ensured both the timely receipt of
debtor balances and that all suppliers were paid to terms, while
inventory levels were reduced as the Brexit contingency was unwound.
This work enabled the Group to reduce covenant net debt by £304m
during the year to £40m.
• Portals to allow online account management were developed to
enable customers to obtain invoices or proof of delivery and make
credit account payments;
• Good progress has been made on the development of customer
apps that will enable customers to interact via smartphone;
• Toolstation, which already had strong digital capability, was able to
quickly move its IT infrastructure to a new platform to support
significantly more traffic and future-proof the business as it
continues to grow at pace;
• The Benchmarx kitchens and joinery brand was integrated into the
Travis Perkins General Merchant to enable customers to purchase
from either business via the same credit account. Internal
structures and incentive schemes have been adjusted to drive
cross-selling and win a greater share of existing customers’ spend;
• The rollout of a new delivery management system commenced,
initially in Keyline and CCF, which will optimise route planning and
allow customers to track their deliveries.
Whilst a large proportion of trade has returned to traditional methods
of purchase, these developments have highlighted the significant
opportunity presented by digitally led service, reinforcing the
requirement to continue to develop the Group’s digital capability
across all businesses.
Strategic and operational progress
At a Capital Markets event in December 2018, the Group laid out its
plans for the years ahead, with two overarching strategic aims being (i)
to focus on best serving trade customers, and (ii) to simplify the
business to increase agility, speed up decision making and enable a
leaner cost base.
Process simplification
In order to protect short term liquidity and also bring forward planned
activity, the Group commenced a programme working with suppliers
which led to the netting out of over half of the fixed price discount
from current commercial arrangements across the Merchanting and
Plumbing & Heating businesses.
During 2020, the Group has accelerated progress on a number of
strategic initiatives, in some cases driven by the need to adapt quickly
and effectively to the challenges presented by the Covid-19 pandemic
but also as part of the overall drive for business process simplification.
These changes form a key part of the ongoing work to improve cost
price visibility in branch and support local decision making.
Conversations are well advanced with other key suppliers regarding
further significant netting of fixed price discounts into the invoiced
price during 2021.
Customer interaction
The Group has set out the objective of creating a “modern merchant”
capable of interaction with customers in all of its businesses. The
initial lockdown required a move to predominantly remote
transactions and, to support that shift, a number of projects were
delivered:
• The Travis Perkins General Merchant website was rebuilt to
significantly improve information on product availability and
facilitate a notable rise in web-based transactions;
Alongside the changes to cost pricing outlined above, the Merchant
businesses have simplified selling price guidance available to the
branch teams. These improvements provide greater consistency of
pricing and also more relevant shelf-edge pricing on lightside
products, further improving customer experience.
Travis Perkins plc Annual Report and Accounts 2020
29
Financial statementsGovernanceStrategic report Business performance and priorities continued
Restructuring programme
In June 2020, reflecting the challenging outlook for the Group’s end
markets and the fixed cost nature of an extensive branch network, the
Group announced a significant restructuring programme which
resulted in the closure of around 190 branches across the
Merchanting and Plumbing & Heating segments. In addition, a
number of support function roles were removed across the
businesses and head office resulting in a reduction of approximately
2,500 roles, equivalent to 9% of the workforce.
In the Travis Perkins General Merchant, branch closures targeted
smaller, subscale branches where either there were difficulties in
operating safe social distancing practices, or where the scale of the
branch meant that profitability would be difficult in a lower volume
environment. In the specialist merchants, where the majority of sales
are delivered to customer sites, the branch closures were also focused
on branches limited by size, geography or operational layout.
Across all Merchant businesses, the restructuring programme has
accelerated plans to close these sites and, over time as demand
rebuilds, establish larger branches that offer a greater depth and range
of stock, alongside more efficient warehousing and delivery operations.
Where branches have closed, sales retention has been in line with
expectations, ranging from around a third in smaller general merchant
branches to over two-thirds in the specialist merchants where the
customer base comprises larger regional contractors allowing an
easier transfer of business to remaining branches.
The June restructuring programme will deliver gross cost savings of
approximately £120m on an annualised basis, with the majority of
actions completed by the end of August 2020. As volumes recover
from the 2020 level, some variable overhead will be reinvested to
support increased activity. An adjusting item of £121m has been
recognised in 2020 in relation to the restructuring programme.
Against the potential maximum cash restructuring costs of £85m
identified in June, around half is expected to be offset by freehold
disposals and, since June, this figure has been further reduced by
satisfactory exit of around £10m of lease obligations.
Portfolio actions
Having completed the vast majority of the work on the Wickes
demerger, on 20 March 2020 the Group announced that it had
placed the process on hold in order to focus on managing through the
pandemic and to maximise liquidity across the Group. With the Group,
and Wickes in particular, having demonstrated the resilience of their
operating models, the Board has taken the decision to recommence
the demerger process which is expected to complete in Q2 2021.
Wickes delivered an excellent performance during 2020 with
like-for-like sales 5.5%, driven by the strength of the Core DIY
segment which saw like for like growth of 19.3%, a trend which has
continued into 2021. Showroom closures have had a marked impact
on Kitchen & Bathroom sales, down (27.4)% on a like-for-like basis
over the year, and this has been exacerbated in the early weeks of
2021, by the third national lockdown. For the 52 weeks to 26th
December 2020 Wickes like-for-like sales were +5.0% with Core
+18.8% and Kitchens & Bathroom down (27.8)%. Web-based leads
remain strong though and indicate a level of pent up demand once
restrictions are eased.
In line with previous plans, Wickes will be capitalised to around
£130mas at the year end, funded by Travis Perkins.
Allied to the Group’s stated objectives of simplifying the portfolio and
focusing on the trade customer, the Tile Giant business was sold in
September 2020.
Although recent market conditions have not supported the sale of the
core P&H segment, the Group did take the opportunity to dispose of
the low margin Primaflow F&P wholesale activity in January 2020. It
remains the intention of the Board to sell the remaining P&H business
when the time is right whilst in the short term continuing to drive
operational improvements to enhance returns further and to optimise
value for shareholders.
Capital markets update
Travis Perkins’ aim post demerger is to continue its focus on delivering
best-in-class service to its trade customers and leveraging the market
leading positions of its portfolio of businesses. Management will
frame the Group’s future ambitions with a Capital Markets Update in
the summer.
30
Travis Perkins plc Annual Report and Accounts 2020
Strategic report
Governance
Financial statements
Other information
Other information
Outlook
The long term fundamentals of the Group’s end markets remain
robust with ongoing demand for new housing and underinvestment in
the repair, maintenance and improvement of the existing UK housing
stock. This is further underpinned by the UK Government’s
commitment to infrastructure investment, alongside stimulus
measures such as green home improvement schemes.
End markets recovered well during the second half of 2020 with
robust RMI activity outstripping a lag in the commercial and
housebuilding sectors. Performance to date in 2021 has followed a
similar trend despite the stricter lockdown conditions.
Since the Autumn, the Group has seen challenges with availability of
product and input cost inflation in core product categories, notably
timber, core heavyside products such as insulation and plasterboard
and lightside products sourced from the Far East.
The Group continues to focus on strengthening its core business and
investing to develop a modern merchanting proposition which will
leave the Group well placed to continue to outperform its markets and
generate value for shareholders.
Technical guidance
The Group’s technical guidance for 2021 is as follows:
• Effective tax rate of 20%
• Base capital expenditure of around £90m to £100m,
excluding Wickes
• Property profits of around £20m
Government assistance
During the first half of 2020, in order to mitigate in part the
impact of reduced volumes, the Group undertook a number
of cost reduction actions and was also able to access
government assistance from the Coronavirus Job Retention
Scheme and Business Rates Relief arrangements.
Given the surge in DIY demand, having initially made claims under
both schemes for the Wickes and Toolstation businesses, the decision
was taken in December to repay government assistance to those
businesses of around £46m. Government assistance to the
Merchanting and Plumbing & Heating businesses in 2020 totalled
approximately £74m. No further claims are anticipated under either
scheme in 2021.
Central costs
Unallocated central costs rose by £7m in 2020, driven by £15m of
stranded costs relating to the separation of Wickes and P&H from the
Group as disclosed in March 2020. This increase was partially offset
by savings from the restructuring programme and substantially
reduced management incentive charges.
Property transactions
Given the impact of the pandemic, fewer property transactions were
completed in the year than in 2019. After a quiet first half, good progress
was made on disposing of surplus freehold assets in the second half of
2020 generating £11m of property profits in the year (2019: £21m).
Significant progress has already been made in exiting both freehold
and leasehold sites vacated as part of the restructuring programme
announced in June.
Dividend
Given the significant impact of the pandemic on financial
performance and the risk to the Group’s liquidity, the Board took the
decision in March 2020 to suspend the dividend. The Board
recognises the importance of dividend distributions and intends to
reinstate dividend distributions in 2021 assuming there is no further
deterioration in the external environment.
Travis Perkins plc Annual Report and Accounts 2020
31
Financial statementsGovernanceStrategic report Business performance and priorities continued
Merchanting
Revenue
Like-for-like growth
£3,065m
2019: £3,703m
(14.0)%
2019: 3.3%
2021
strategic priorities
• Continue to enable local
empowerment with greater
autonomy on local pricing and
product range decisions
• Leveraging the integration of
kitchens and joinery into the
General Merchant offer, with shared
credit accounts and simpler trading
• Enhanced website with trade
account management capability
• Rebuilding the network with
larger, more efficient branches
able to stock a greater depth of
heavyside products
Total revenue
Like-for-like growth
Adjusted operating profit*
Adjusted operating margin
ROCE
Branch network
2020
2019
Change
£3,065m
(14.0)%
£152m
5.0%
7%
846
£3,703m
3.3%
£284m
7.7%
12%
984
(17.2)%
(17.3)ppt
(46.5%)
(270)bps
(5)ppt
(138)
* Segmental adjusted operating profit figures are presented excluding property profits
After a solid start to the year, trade
merchanting sales were severely impacted
by the initial lockdown period with the
majority of branches closed and focus on
support only for essential projects, including
the building of the network of Nightingale
hospitals Following the classification of the
majority of construction activities as
essential, branches progressively re-opened
from late April onwards although the
disruption to the supply chain caused by the
lockdown was significant and took several
months to unwind, particularly in the
specialist merchants.
The second half recovery was very
encouraging though, particularly in the Travis
Perkins General Merchant, led by domestic
RMI demand where volumes were
approaching 2019 levels by the end of the
year. Housebuilding and commercial
construction, to which the specialist merchants
are primarily exposed, were slower to recover
with volumes still down by between 10% and
15% during the fourth quarter.
During the crisis, in order to continue to
support customers safely, all of the Merchant
businesses moved to pre arranged collection
models, organised either by phone or online.
This has proven successful across the full
range of customers and work continues to
develop this offer as a permanent part of the
customer proposition.
Gross margins in the Merchanting segment
were modestly lower than 2019, primarily
reflecting a reduction in annual volume
rebates. Input cost inflation was with low for
the year as a whole although there were
increases in certain product categories in the
second half of the year. Prices were adjusted
to mitigate the impact of these increases,
while investments were made predominantly
in lightside categories to ensure relevant shelf
edge pricing.
32
Travis Perkins plc Annual Report and Accounts 2020
Other information
Adjusted operating profit
Return on capital employed
Merchanting
£152m
2019: £284m
7%
2019: 12%
2021
strategic priorities
• Rollout of leading delivery
management system in both CCF
and Keyline to optimise route
planning and enable customers to
track deliveries
• Digital development and expanding
BIM capability in BSS
• Expanding TF Solutions, the
Group’s specialist air conditioning
and refrigeration business
• Continued modernisation of
market-leading propositions
through enhanced pricing tools and
process simplification
With significant uncertainty regarding near
term volumes, as part of the restructuring
plans 140 Merchanting branches were
closed. These closures, together with the
restructuring of sales and above-branch
support teams, are expected to generate
around £90m of annualised cost savings.
These changes have accelerated the planned
network strategy to exit subscale branches,
leading to an increase of 7% in the average
turnover per branch across Merchanting
which, complemented by investment in larger
branches as the businesses rebuild, will drive
longer term operational efficiencies.
These cost actions helped to soften the
impact of lost sales volume but, with social
distancing regulations driving inefficiencies, a
relatively high fixed cost base and gross
margins down as described above, operating
margin for the year reduced by 270bps.
Throughout the pandemic the Merchant
businesses have had a clear focus on cash, in
particular the collection of monies due from
credit customers. A successful collaboration
between the credit, sales and branch teams
to leverage the businesses’ strong customer
relationships has resulted in excellent cash
collections throughout the year with the sales
ledger in good shape going into 2021.
Travis Perkins plc Annual Report and Accounts 2020
33
Financial statementsGovernanceStrategic report Business performance and priorities continued
Plumbing &
Heating
Revenue
Adjusted operating profit
£1,069m
2019: £1,465m
£19m
2019: £48m
2021
strategic priorities
• Focus on “quality of sales” using
significantly enhanced data to get
the right mix of business
• Continuing to improve the business
and earnings growth through cost
reduction and improved efficiency
• Complementary online platforms
providing breadth in specialist
categories and increasing digital
sales participation
• Operating as a stand-alone
business with independent support
functions, enabling a sale at the
right time
Total revenue
Like-for-like growth
Adjusted operating profit3
Adjusted operating margin
ROCE
Branch network
20201
20192
Change
£1,069m
(11.2)%
£19m
1.8%
5%
354
£1,465m
(1.7)%
£48m
3.3%
13%
375
(27.0)%
(9.5)ppt
(60.4)%
(150)bps
(8)ppt
(21)
1. 2020 figures include £28m of revenue and £0.7m of adjusted operating profit plus the £1.8m profit on sale of the
business.
2. 2019 figures include £269m of revenue and £7.4m of adjusted operating profitf rom PF&P wholesale, which was sold
in January 2020.
3. Segmental adjusted operating profit figures are presented excluding property profits.
During the initial lockdown, P&H was the
most significantly impacted of the Group’s
businesses with branches initially being
forced to close, customers restricted to
essential maintenance work and the
subsequent challenges faced by installers
who had to adopt a very careful approach to
working in domestic properties.
The combination of encouraging sales, higher
gross margin and cost actions led to an
operating profit in the second half of £27m,
some 10.7% ahead of the previous year,
which indicates the health of the business.
Over the full year, the disruption of the first
half led to an operating profit of £19m
(2019: £48m).
The recovery in the second half of the year
has been robust, however, with like-for-like
sales up 0.9% driven by strong demand
through the branch and showroom network.
The new build and social housing sectors
have lagged though, as have sales on
major contracts.
It remains the intention of the Group to divest
the P&H business when the market conditions
are suitable. The Board will continue to focus
on implementing strategic actions to improve
the remaining Plumbing & Heating business
further whilst assessing opportunities to
optimise value for shareholders.
The performance of the specialist digital
businesses - Underfloor Heating Store and
Plumbnation - was particularly encouraging
with total sales of £51m during the year
representing a 7% growth.
Gross margins were ahead of prior year, with
the impact of lower annual volume rebates
offset by the shift in sales mix towards small
installer customers and the business mix
change following the sale of the PF&P
wholesale business in January.
34
Travis Perkins plc Annual Report and Accounts 2020
Other information
Toolstation
Revenue
£633m
2019: £445m
Like-for-like growth
22.2%
2019: 16.3%
2021
strategic priorities
• Continued network growth with a
further 100 branches in 2021: 60 in
the UK and 40 in Europe
• Trials of new formats, including
click-and-collect only branches
• Launch of mobile app to further
enhance digital capability
• Rollout of UK trade credit offer
to appeal to an even wider
customer base
Toolstation revenues increased by £188m in
the year, with the consolidation of Toolstation
Europe (following the acquisition in Q4 2019)
accounting for £48m of the increase.
Like-for-like growth of 20.9% in Toolstation
UK represented an exceptional performance,
especially given the level of disruption from
the lockdown in late March and April.
Alongside the ongoing work to continue to
ensure a compelling customer proposition,
the Toolstation UK business also made
significant progress in developing its
infrastructure. With branches unable to serve
customers directly during the initial lockdown,
the branches operated as click & collect
fulfilment centres.
Total revenue
Like-for-like growth
Adjusted operating profit*
Adjusted operating margin
ROCE
Branch network (UK)
Branch network (Europe)
Adjusted operating profit – UK
2020
£633m
22.2%
£8m
1.2%
2%
460
83
£24m
2019
£445m
16.3%
£25m
5.5%
7%
400
66
£29m
Change
42.2%
5.9ppt
(68.0)%
(430)bps
(5)ppt
60
17
(17.2)%
* Segmental adjusted operating profit figures are presented excluding property profits
To support this the Toolstation website was
rebuilt in a matter of days, before the wider IT
infrastructure of the business was
replatformed over following weeks in order to
be scalable and more resilient as the
business grows.
The pivot to digital trading required a
significant increase in direct-to-customer
deliveries, and to satisfy this demand the
Redditch distribution centre was expanded
and repurposed from store replenishment to
customer fulfilment. Despite a pause in the
network expansion programme between
March and June as fitters could not access
sites, 60 new branches were opened in the
UK during the year as planned. New formats
continue to be trialled, including smaller
footprint branches and variations on the click
& collect model to improve both the
customer experience and operational
efficiency. The number of new stores for
2021 is expected to be similar to 2020.
The costs involved in adapting and running
the distribution network on a socially
distanced basis, as well as the higher
proportion of delivered sales and the costs to
make the necessary improvements to the
business’ digital capabilities, increased the
operating costs of the business during the
year, more than offsetting the growth in gross
profit generation in the UK.
For Toolstation Europe, the response to
Covid-19 has differed across the countries in
which the business operates but, in all cases,
the strength of the customer proposition has
driven further market share gains. The
combination of the multichannel offering and
consistent availability of stock has been
extremely well received by tradespeople
across the Netherlands, Belgium and France
and has allowed branches to trade effectively
throughout the pandemic when competitors
have been forced to close.
These competitive advantages have seen
underlying revenue* increase by 79% in the
Netherlands and Belgium (60% on a like for
like basis) where 9 new branches were
opened, taking the total to 64. In France
underlying revenue* grew by 92% with
like-for-like sales up 75%. 8 new branches
were added, taking the total to 19, and a new
distribution centre in Lyon is now operational,
laying the foundations for future expansion.
With the European business very much at the
initial rollout stage, and with the disruption of
the pandemic, a loss of £(16)m was recorded
for 2020. Losses in 2021 are expected to be
at a similar level as the rollout of new
branches continues at pace.
Travis Perkins plc Annual Report and Accounts 2020
35
Financial statementsGovernanceStrategic report Business performance and priorities continued
Key highlights
2020 revenue
Like-for-like sales growth
£1.4bn
5.5%
2/3sales digitally-led
233stores with 142 stores in our new
c.550k
28,000
sq ft
TradePro members
format
Digitally-led,
service-enabled, home
improvement business
average store size
36
36
Travis Perkins plc Annual Report and Accounts 2020
Travis Perkins plc Annual Report and Accounts 2020
Retail
Total revenue
Like-for-like growth4
Adjusted operating profit3
Adjusted operating margin
Return on capital employed
Store network – Wickes
20201
20192
£1,391m
5.0%
£77m
5.5%
6%
233
£1,342m
8.6%
£97m
7.2%
7%
235
Change
3.6%
(3.6)ppt
(20.6)%
(170)bps
(1)ppt
(2)
1. 2020 figures include £31m of revenue and an adjusted operating loss of £0.2m, plus the £1.4m profit on sale
of Tile Giant
2. 2019 figures include £47m of revenue and £0.1m of adjusted operating profit from Tile Giant, which was sold in
September 2020.
3. Segmental adjusted operating profit figures are presented excluding property profits
4. For the 52 weeks to 26th December 2020 Wickes like-for-like sales were +5.0% with Core +18.8% and Kitchens &
Bathroom down (27.8)%
Demonstrating the strength of its balanced
business model, Wickes delivered a highly
credible 5.5% like-for-like sales growth for
the full year, despite periods of lockdown and
disruption to trading operations throughout
the year.
This performance was driven by strong Core
sales growth of 19.3% on a like-for-like basis,
leveraging Wickes’ well developed digital and
flexible fulfilment capability and increasing
market share across the year. Sales also
benefited from heightened DIY customer
demand across a broad range of categories
as customers renewed their interest in home
improvement.
Do It For Me sales were significantly
impacted by restrictions in trading operations,
ending the year down (27.4)% on a like-for-
like basis. In-store kitchen and bathroom
showrooms were, at times, completely closed
and customers remained cautious
throughout the year to progress installation
projects in their homes. A fully digitally
enabled virtual customer journey was
developed and launched in the second half of
the year, enabling Wickes to continue to trade
despite ongoing showroom closures.
Gross profit margin was marginally higher
year-on-year as a reduction in promotional
activity outweighed an unfavourable shift in
product mix, driven principally as a result of
the loss of showroom driven business. The
significant change in fulfilment methods, with
delivery to customer order volumes more
than doubling across the year and click and
collect volumes increasing by over 450%,
increased fulfilment costs. Work is underway
to drive efficiencies in distribution overhead
given the expectation that digital sales
participation will continue to grow over time.
Overheads were impacted by £9m of costs
directly as a result of the Covid-19 pandemic
to ensure customers and colleagues
remained safe. The business also had to
carry around £7m of unproductive labour
costs during the first lockdown period,
principally relating to Kitchen & Bathroom
sales, delivery and installation colleagues.
Following the strong sales performance of
Wickes, the decision was taken in December
2020 to repay all government support, which
is therefore excluded from the Retail segment
results.
With the continued strong performance of
the Wickes business and more stable market
conditions, the Board has re-commenced the
demerger process with a view to completion
in Q2 2021.
In September 2020, the Group completed
the sale of its Tile Giant business.
Other information
Travis Perkins plc Annual Report and Accounts 2020
37
Financial statementsGovernanceStrategic report Business performance and priorities continued
Wickes has a compelling
investment case and a clear
framework to win
Investment case
Distinctive and hard to
replicate customer
proposition
Uniquely balanced
business
Low cost and efficient
operating model
Proven levers
for growth
Framework to win
Vision
A Wickes project in every home
Our mission is to
be the partner of
choice for home
improvers and
local trade
Mission
To be the partner of choice for home improvers and local trade
Customer
proposition
Local Trade
From trade-trusted branches to
always being 10% cheaper, we can
save you time and money when you
shop with TradePro
Purpose
To help the nation feel house proud
Do it for me (DIFM)
From concept to completion, plus all
the finishing touches, we can help you
with your project every step of the way
DIY
From our curated range to bringing
you the right quality products at the
right prices, we can help you to tackle
your project providing advice,
guidance and knowledge
Enabler
Delivering brilliant customer experience through engaged colleagues,
a winning culture and growing responsibly
Foundations
Curated
product ranges
Digitally-led
Distinctive service
model providing
inspiration,
service
and fulfilment
Low cost
right-sized
physical estate
Simple, clear
pricing offering
value to
customers
38
38
Travis Perkins plc Annual Report and Accounts 2020
Travis Perkins plc Annual Report and Accounts 2020
The store model is
complementary to the digital
journey with c.95% of sales
touching the stores
4. DIFM
Space to dream and visualise your
project with expert help at hand
1. Order fulfilment
Orders picked and ready
for collection or delivery
Other information
3. Assisted selling
Support to find exactly
what you need
2. Self service
Simple, quick and
easy to shop
2021 strategic objectives
Store model – Enhanced service and estate refresh
Accelerating DIFM – Natural growth extensions
Developing digital capability
DIY category wins – Getting fair share in underweight categories
Winning for the trade – TradePro growth
Growing responsibly
Guided by strong leadership
Christopher Rogers
Chairman Designate
Chris has served as a Non-executive
Director of Travis Perkins plc since 2013
and was the Senior Independent Director
until 28 April 2020. He is currently a
Non-executive Director of Sanderson
Design Group plc (formerly Walker
Greenbank plc), Vivo plc and Kerry Group.
He is a visiting fellow at Durham University.
From 2005 to 2016 Chris was an Executive
Director of Whitbread plc, serving as Group
Finance Director and Global Managing
Director of Costa Coffee. He was Group
Finance Director of Woolworths Group plc
and Chairman of the Woolworths
Entertainment businesses from 2001 to
2005. Prior to that, he held senior roles in
the finance and commercial functions of
Kingfisher plc.
David Wood
Chief Executive Officer
David joined the Wickes Group in May
2019. With almost 30 years in the retail and
consumer sector, David is a highly
experienced executive and CEO with
extensive board level experience in the UK,
Europe and North America, having spent
the majority of his career with Tesco,
Unilever and Mondelez. David served as
Commercial Director on the Board of Tesco
Hungary from 2010 to 2012 and between
2012 and 2015 David served on the UK
Operating Board of Tesco PLC as Chief
Marketing Officer and Group Managing
Director. More recently David was Group
President of Kmart Holding Corp from
2015 to 2017, followed by a brief tenure as
CEO of Mothercare PLC in 2018.
Julie Wirth
Chief Financial Officer
Julie joined the Wickes Group as CFO in
November 2018 having held Board and
senior finance roles at Group and divisional
level in the retail sector. This included 20
years at Home Retail Group plc, five years
at Musgrave GB Ltd and three years at
Countrywide Farmers plc, with
responsibility across finance, IT, legal and
secretariat, and change management.
Travis Perkins plc Annual Report and Accounts 2020
39
Financial statementsGovernanceStrategic report Financial performance
Revenue analysis
Sales across the Merchanting and P&H businesses were hit hard by the initial lockdown but recovered well through the second half of the year.
As described above, Toolstation was able to adapt its business model during lockdown to maintain trade and subsequently to build on those
changes to drive exceptional growth during the balance of the year.
Retail was impacted by the closure of Kitchen & Bathroom showrooms during the first lockdown, which account for around one third
of sales. The Wickes core business, however, was ideally placed to benefit from the surge in DIY demand and delivered excellent growth
from June onwards.
Volume, price and mix analysis
Total revenue
Volume
Price and mix
Like-for-like revenue growth
Network expansion and acquisitions / disposals
Trading days
Total revenue (decline) / growth
Quarterly like-for-like revenue analysis
Merchanting
Toolstation
Retail
Plumbing & Heating
(13.4)%
(0.6)%
(14.0)%
(3.5)%
0.3%
(17.2)%
23.6%
(1.4)%
22.2%
19.6%
0.3%
42.1%
5.3%
(0.3)%
5.0%
(1.7)%
0.3%
3.6%
(15.0)%
3.8%
(11.2)%
(16.2)%
0.4%
(27.0)%
Group
(7.2)%
0.1%
(7.1)%
(4.7)%
0.3%
(11.5)%
Like-for-like revenue grow
Merchanting
Toolstation
Retail
Plumbing & Heating
Total Group
Q1 2020
Q2 2020
Q3 2020
Q4 2020
H1 2020
H2 2020
FY 2020
(8.7)%
(42.8)%
(3.1)%
1.3%
(25.8)%
(1.0)%
(14.0)%
9.1%
16.5%
25.5%
34.7%
12.9%
30.4%
22.2%
4.5%
(19.8)%
18.3%
20.0%
(8.2)%
19.6%
5.0%
(1.9)%
(48.4)%
0.4%
1.4%
(22.8)%
0.9%
(11.2)%
(3.8)%
(34.8)%
3.9%
7.7%
(19.3)%
5.9%
(7.1)%
At a Group level, price inflation was neutral across the year reflecting a benign input cost environment. There was one extra trading day in the year
but the merchant businesses closed earlier than usual in December, as management teams wished to ensure that colleagues could take a longer
break after a challenging year. This is reflected in the December like-for-like sales which saw a slight dip after a strong upward trajectory in the
second half.
Toolstation total sales include fully consolidated sales from Toolstation Europe from 1 October 2019, partly driving the significant step up in growth
between like-for-like and total sales alongside expansion of the Toolstation network. Conversely, P&H total sales figures were impacted by the
disposal of the PF&P Wholesale business in January 2020 and Retail by the sale of Tile Giant in September 2020.
Operating profit and margin
The significant drop in revenue, combined with a predominantly fixed overhead base, negatively impacted on profitability. As outlined above, the
Group therefore took swift and appropriate actions to reduce costs, tightly controlling discretionary spend and implementing a restructuring
programme in June 2020. As a result of these actions, adjusted operating profit for the year was £227m (2019: £442m).
£m
Merchanting
Toolstation
Retail
Plumbing & Heating
Property
Unallocated costs
Adjusted operating profit
Amortisation of acquired intangible assets
Adjusting items
Operating profit
FY 2020
152
8
77
19
11
(40)
227
(9)
(140)
77
FY 2019
284
25
97
48
21
(33)
442
(9)
(200)
232
Change
(46.5)%
(68.0)%
(20.6)%
(60.4)%
(47.6)%
(21.2)%
(48.6)%
Adjusting items in 2020 are primarily related to the restructuring programme at a cost of £121m. In addition, the Group recognised adjusting
items of £13m in relation to Wickes store impairments and £11m in relation to costs to separate Wickes from the Group ahead of the planned
demerger. Further details are provided in note 3.
40
Travis Perkins plc Annual Report and Accounts 2020
Adjusting items in 2019 primarily related to the impairment charge
taken against the IT improvement programme, and the costs to
separate the P&H business from the Group.
Free cash flow
(£m)
Finance charge
Net finance charges, shown in note 6, were £85m (2019: £87m). In
the year, £10m of accelerated interest was incurred on the early
repayment of the 2014 bond but this was more than offset by a £12m
favourable year-on-year movement on the remeasurement of foreign
exchange and derivatives.
Interest costs overall were in line with the previous year as was
interest recognised on lease liabilities at £59m.
Taxation
The tax charge for continuing activities for the period to 31 December
2020, including the effect of adjusting items, is £14m (2019: £58m).
This represents an effective tax rate (“ETR’’) of negative 184.4%
(2019: 32.1%).
The tax charge for the year before adjusting items is £37m (2019:
£69m) giving an adjusted ETR of 25.7% (standard rate 19%, 2019
actual 19.7%). The adjusted ETR rate is higher than the standard rate
due to the effect of expenses not deductible for tax purposes (such as
depreciation of property), unutilised overseas losses and a decrease in
the deferred tax asset related to employee share schemes following a
decrease in the share price in 2020.
Earnings per share
The Group reported a statutory loss after tax of £22m (2019: profit of
£123m) resulting in a basic loss per share of 8.8 pence (2019:
earnings of 48.9 pence). There is no difference between basic and
diluted basic earnings per share.
Adjusted profit after tax was £105m resulting in adjusted earnings per
share (note 20(b)) of 42.4p (2019: 112.7 pence). There is no difference
between adjusted basic and adjusted diluted earnings per share.
Cash flow and balance sheet
Throughout the Covid-19 crisis the Group has maintained a close focus
on cash flow and its liquidity position. The actions taken by the Group
have protected liquidity throughout, generating significant cash from
working capital during the year and maintaining a strong balance sheet.
As a result of the Government’s decision to allow deferral of VAT
payments due on or before 30 June 2020 as a result of the Covid-19
crisis, the Group received a deferred cash benefit on tax payments of
£107m in H1 2020. This amount was required to be paid to HMRC on
or before 31 March 2021. Given the strength of the Group’s liquidity
position, this amount was paid in full during December 2020.
Strategic report
Governance
Financial statements
Other information
Other information
FY 2020
FY 2019
215
122
195
(28)
(59)
(45)
400
421
141
(129)
(26)
(57)
(53)
297
(108)
(121)
12
304
19
195
Group adjusted operating profit excluding
property profits
Depreciation of PPE and
other non-cash movements
Change in working capital
Net interest paid (excluding lease interest)
Interest on lease liabilities
Tax paid
Adjusted operating cash flow
Capital investments
Capex excluding freehold transactions
Proceeds from disposals excluding
freehold transactions
Free cash flow before
freehold transactions
The key driver of the improvement in free cash flow was a significant
reduction in working capital during the year, partially offset by the
reduction in adjusted operating profits previously outlined.
The significant cash inflow from working capital was driven
primarily by:
• A reduction in inventory of £97m, principally the result of the
utilisation of around £60m of additional stock held at the end
of 2019 to mitigate a possible no-deal exit from the EU. The
remainder of the working capital movement largely related to the
efficient use of stock from branches closed as part of the
restructuring and tight controls in place to manage stock holding
over the second half of the year, offsetting increases from the
expansion of the Toolstation network; and lower receivables
balances, driven by an ongoing focus on cash collections
throughout the second half of the year and building on the
excellent work of the credit teams during the first phase of
the pandemic.
Capital investment
Net capital expenditure was £9m higher than previous year, driven
primarily by lower disposal proceeds as property transactions were
paused during the initial lockdown.
(£m)
Maintenance
IT
Growth capex
Base capital expenditure
Freehold property
Gross capital expenditure
Disposals
Net capital expenditure
FY 2020
FY 2019
(42)
(15)
(51)
(108)
(26)
(134)
64
(70)
(56)
(12)
(53)
(121)
(22)
(143)
82
(61)
Overall base capital spend was £13m lower during the year driven by
lower spend during the early phases of the pandemic.
Travis Perkins plc Annual Report and Accounts 2020
41
Financial statementsGovernanceStrategic report Financial performance continued
Capital investment continued
The reduction was driven by maintenance capital expenditure where the Group has taken the opportunity to rephase planned vehicle
replacements, including the reallocation of vehicles previously aligned to branches which have now been closed.
IT programme spend was slightly ahead of last year, reflecting the investment in projects to modernise the Group’s infrastructure, both as a
response to the Covid crisis and to accelerate planned changes to enhance the Group’s customer proposition.
Growth capex investment was in line with previous year after a drive during the second half of the year to get the Toolstation UK branch rollout
back on track following delays during the first lockdown. Two larger footprint Travis Perkins General Merchant branches were also opened
during the year.
Uses of free cash flow
Free cash flow (£m)
Investments in freehold property
Disposal proceeds from freehold transactions
Acquisitions / disposals
Dividends
Pensions payments
Sale / (purchase) of own shares
Cash payments on adjusting items
Other
Change in cash and cash equivalents
FY 2020
304
(26)
52
54
_
(12)
6
(65)
(15)
298
FY 2019
195
(22)
64
(43)
(116)
(10)
(8)
(90)
(18)
(48)
During the year, the focus on protecting the liquidity position of the Group was highly successful and led to an increase in cash and cash
equivalents of £298m. The key drivers of the improvement were:
• Strong free cash flow driven by working capital management
• Suspension of dividend payments during the year
• £50m from the sale of Primaflow F&P
Net debt and funding
The strong focus on cash and liquidity, and the resulting cash position of the Group, has driven a significant improvement in the net
debt position.
Covenant net debt
Covenant net debt / adjusted EBITDA
Net debt
Net debt / adjusted EBITDA
FY 2020
FY 2019
Change
£40m
0.13x
£1,397m
2.8x
£344m
0.49x
£1,788m
2.5x
£(304)m
£(391)m
0.3x
Target 2.5x
Note - the covenant test under financing agreements is based on ‘frozen GAAP’ before the introduction of IFRS16. Leverage covenant for June 2020 was relaxed from 3.0x to 3.5x. It
was waived for December 2020 and will be reinstated at 3.0x at June 2021.
Covenant net debt reduced by £304m from 31 December 2019 to
£40m. As described above, this movement was a result of increased
cash balances primarily due to excellent working capital management
through the year. This was also the principal driver of the
corresponding reduction in net debt under IFRS 16 Despite the
significant step down in profitability of the Group, the reduction in
IFRS 16 net debt caused the rolling 12-month net debt / adjusted
EBITDA ratio to increase only modestly year-on-year to 2.8x.
In May 2020 the Group took the prudent step to agree with its lenders
a relaxation of its financial covenants for the test dates at the end of
June and December 2020:
• The interest cover covenant was waived for both June and
December 2020
• The net leverage covenant was relaxed to 3.5x for June 2020
• The net leverage covenant was waived for December 2020
• A minimum liquidity headroom covenant was established for
September and December 2020
Funding
As at 31 December 2020, the Group’s committed funding of £950m
comprised:
• £300m guaranteed notes due September 2023, listed on the
London Stock Exchange
• £250m guaranteed notes due February 2026, listed on the
London Stock Exchange. These notes were issued in November
2020 at a coupon of 3.75%. Proceeds were used to buy in notes
due to mature in September 2021
• A revolving credit facility of £400m, refinanced in January 2019,
of which £54m matures in 2024 and the remaining £346m
matures in 2025
As at 31 December 2020, the Group had undrawn committed
facilities of £400m (2019: £400m) and deposited cash of £455m
(2019: £140m), giving overall liquidity headroom of £855m. The
Group’s credit rating, issued by Standard and Poor’s, was maintained
at BB+ negative watch following its review in April 2020. In November
2020, Fitch Ratings assigned the Group an investment grade rating of
BBB- with stable outlook.
42
Travis Perkins plc Annual Report and Accounts 2020
Other information
Building a sustainable business framework
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 negotiated a new revolving credit facility with a syndicate
of eight banks in January 2019. The new facility is for a total value of
£400m and matures in January 2024. Built into the agreement is an
option to extend the size of the facility to £550m, and a further
one-year extension option which can be activated in March 2021.
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. 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 2020 the nominal value of currency forward contracts,
all of which were US dollar denominated, was $85m (2019: $35m).
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
2020 was approximately 0.9% (2019: 0.4%) of credit sales.
In summary, the key aspects of the Group’s financial risk
management strategy are to:
• Run the business to investment grade credit parameters
• Reduce reliance on the bank market for 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 has to be lower than 3.0x
and it was 0.13x (2019: 0.71x) at the year end
• Have a conservative hedging policy that reduces the Group’s
exposure to currency fluctuations
The financial ratios are calculated under IFRS as adopted by the EU as
it was immediately before the adoption of IFRS 16 – Leases.
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 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.
Viability assessment
In accordance with provision 31 of the UK Corporate Governance Code,
published by the Financial Reporting Council in 2018, 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 44 to 51 of
the Annual Report. The Board believes the Group is well placed to
manage those risks successfully.
Board has decided that it is appropriate to assess the performance of
the Group over a three year period from 28 February 2021, the
month-end date closest to the approval of the 2020 annual results.
Three years has been chosen because this is the period that it is
reasonably possible to forecast forward with a degree of accuracy.
This is 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 means three years is the
appropriate period over which to give users of the Annual Report a
reasonable degree of confidence.
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 principally
based upon the 2008/2009 financial crisis and the mitigating actions
that the business would take to protect the Group’s viability. These
actions include restricting credit and reducing costs, capital and
revenue investment and payments to shareholders. In undertaking
this analysis, the Board considered the direct impacts of ongoing
Covid-19 restrictions and potential further restrictions, as well as
secondary effects on the wider economy and property market and
the potential impact of the withdrawal of the government support
schemes. Given the Group’s trading experience throughout the
Covid-19 pandemic to date and the nature of the near-term risks to
the economy, the use of the 2008–2009 financial crisis as a model
for a prolonged downturn in the housing market remains appropriate.
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.
Travis Perkins plc Annual Report and Accounts 2020
43
Financial statementsGovernanceStrategic report Statement of principal risks and uncertainties
In an exceptional year dominated by the global
pandemic, we have demonstrated a clear
understanding of the risks we face and taken a
proactive approach to risk management to
identify and pursue opportunities, drive better
decision making and, most importantly, prioritise
the safety and well-being of the Group’s
colleagues and customers.
The pandemic has required an ongoing and agile assessment of risks,
challenges and issues, adjusting to the development of Covid-19 in
real time. The pandemic and its wider economic effects continue to
bring uncertainty to our operations and the delivery of our strategic
objectives. Even with a mass vaccination programme, this uncertainty
is likely to persist.
Risk management framework
We operate in an industry and markets which, by their nature, are
subject to a number of inherent risks. In common with most large
organisations we are also subject to general commercial, political
and economic risks. We are able to mitigate those risks by adopting
different strategies and by maintaining a strong system of internal
control which is routinely tested and assured.
Our risk management framework has three pillars:
• Top down - activities at the Board and Group Leadership Team
levels, focused on material risks to the strategy and operations.
• Bottom up - activities across the Group that capture risk
perspectives that are significant at a business unit, programme
or functional level.
• Emerging risk - new and emerging risks are considered through
the regular risk activities above, the results of assurance activities,
and, at least twice a year, through a process that assesses our risk
set against external benchmarks.
The output from each pillar informs the process to determine our
principal risks.
Responsibility and oversight
The Board has overall responsibility for risk management and internal
controls, and for reviewing their effectiveness at least annually. The
Board is supported in its assessment by the work of the Audit
Committee, which regularly assesses the risk framework and the
results of key assurance processes, including the work of Internal
Audit, to provide assurance to the Board that risk is being effectively
managed throughout the Group. Further details on risk management
responsibilities and oversight are given in the Corporate Governance
Report on page 79.
Risk appetite
The Board accepts that, in order to achieve its strategic objectives,
and generate suitable returns for shareholders, it must accept, and
manage, a certain level of risk. It undertakes an exercise, at least
annually, to consider the nature and level of risk it is prepared to
accept to deliver the strategy. Risk appetite is set across a suite of risk
categories directly relevant to the Group, supported by high-level risk
statements which set out the expectations for the management and
control of each category of risk. The resulting assessment of risk
appetite has been set to balance opportunities for growth and
business development in areas of potentially higher risk and return,
whilst prioritising safety and maintaining the Group’s reputation, legal
and regulatory compliance and the desired high levels of customer
service and satisfaction.
44
Travis Perkins plc Annual Report and Accounts 2020
In addition to its annual review in September, earlier in the year the
Board also assessed whether the level of change prompted by
Covid-19 might lead it to revise its risk appetite.
This review concluded that the Group’s response to Covid-19 had not
sought to take additional risk and that its risk appetite in related risk
categories was already, and remained, one of low risk.
Risk assessment and reporting
Our risk management processes aim to identify and assess
risks before they impact on activities, position the businesses
and support functions to effectively manage those risks and
leverage related opportunities.
The Board has developed a risk reporting framework that ensures it
has visibility of key risks, the potential impacts on the Group and how
and to what extent those risks are mitigated.
Our risk management activities continue to be developed to support
management’s assessments of threats and opportunities that could
materially impact strategic delivery, performance, compliance and
reputation. Whilst Covid-19 has dominated risk activities for much of
2020, there has also been a focus on developing and delivering the
risk assessments required by the newly developed minimum
standards that underpin our 12 material ESG focus areas. This work
will continue into 2021. In addition, a plan has been developed to
further embed risk assessment into key strategic and performance
reviews in 2021, bringing an increased and regular focus on risk and
opportunity management at key decision points.
Risk assurance
We operate a “three lines of defence” model to obtain assurance that
major risks are adequately mitigated and controlled, as set out below.
Oversight is provided by the Group Leadership Team and the Audit
and Stay Safe Committees, which includes review of progress against
agreed improvement actions. Regular updates on assurance activities
are provided to the Board.
Line of
Defence
1st
Source of assurance
Nature of assurance
Business operations
& operational
management
Branches & distribution
centres
2nd
Central functions
Includes Safety, Fleet,
Legal, Finance, IT
and HR
3rd
Independent reviews
Internal audit,
external audit and
other third parties
Direct assurance - execution of
policies and procedures, training
completion, management
controls and monitoring, key
performance indicators and
self-assessments
Management assurance - risk
management programme,
compliance and monitoring
activities, central governance
processes (including the setting of
policies, procedures and training)
Independent assurance - internal
audit activities and third party audits
and reviews that objectively assess
the adequacy and effectiveness of
governance, risk management and
controls and support continuous
improvement
Other information
Principal risks
The Board and Group Leadership Team robustly assesses the Group’s
principal and emerging risks at least twice a year. During 2020 the
Board has considered principal risks at four meetings, including
detailed assessments of the impact of Covid-19 on the risk set.
The principal risks that we consider to have a potentially material
impact on the Group’s operations and the achievement of its strategic
objectives are set out below. They are ordered by risk category rather
than relative size of risk. The inherent risk (before the operation of
mitigating controls) is stated for each risk together with an indication of
the current trend for that risk and strategic objectives that are potentially
impacted. Further detail in respect of the potential impact of these risks
and the mitigating actions taken are explored on the following pages.
The scope and potential impact of risks will change over time. As such
the risks set out below should not be regarded as a comprehensive
statement of all potential risks and uncertainties that may manifest in
the future. Additional risks and uncertainties that are not presently
known to us, or which are currently deemed immaterial, could also
have an adverse effect on the Group’s future operating results,
financial condition or prospects.
Risk category
External
Strategic
Technological
Operational
Key
A Best-in-class services
B Focus on trade
C Advantaged businesses
D Simplify the Group
E Financial strength
Principal risks
Market conditions
Pandemic NEW
Changing customer & competitor landscape
Supplier risks
Strategic objective
ABC
AE
ABC
ABDE
Portfolio management
Change management
ESG NEW
IT systems and infrastructure
Cyber threat and data security
People
Health, safety & well-being
Legal compliance
N New
h
Increasing
i Decreasing
1 Limited change year-on-year
BCDE
ACDE
ABCE
AD
AE
ABC
AE
ABCDE
Risk trend
2020
h
N
h
h
1
1
N
1
h
1
1
h
2019
1
1
1
1
h
h
h
1
1
h
Inherent risk
High
High
High
Medium
Medium
High
High
High
High
Medium
Medium
Medium
Key disruptive risks that may impact the viability of a strategy or
business model are also identified and managed. Whilst several
principal risks, including market conditions, supplier risks and the
changing customer and competitor landscape, include elements that
are considered disruptive in nature, they are categorised above
according to the primary driver of the risk.
Key changes in the year
The risk environment in which we operate does not remain static and
the Board has made the following changes to the principal risk set
in 2020:
• Covid-19 was identified as an emerging risk in the 2019 report and
has been the dominant area of focus for our risk management
activities throughout 2020. Pandemic risk, specifically in relation
to Covid-19, is now recognised as a new principal risk due to the
inherent uncertainty associated with it. A pandemic is one of the
very few risks that could result in the complete shutdown of our
operations. Covid-19 has the potential to amplify or accelerate the
onset of certain of our other principal risks and this potential for
risk interdependencies has been kept under review during 2020,
alongside the additional mitigation measures implemented.
• Brexit risk assessment and contingency planning remained a
focus in 2020. In preparation for the end of the transition period,
to offset potential disruption to the flow of goods in the event of
“no deal”, the business units again built targeted contingency
stocks in the categories deemed most at risk, to ensure stock
remained available to customers. To date, there has been little
Brexit-related impact to the flow of goods although Covid-19
related disruption at certain ports has impacted us in a limited way.
The Board no longer considers Brexit to be a principal risk.
Management have prepared for, and will continue to implement,
the required changes to customs procedures, product standards
and the recruitment of EU citizens, which remain the more
significant areas of Brexit impact for the Group. Where relevant,
Brexit-related risks have been incorporated into our other principal
risks, and the underlying “bottom up” risk management processes.
• ESG is an area of increasing importance, as we recognise our
impact and potential influence on the environment, the
construction industry and wider society. We are seeking to take a
leading position on ESG matters, which both addresses our
responsibilities and an increasing level of interest and expectations
from our customers, investors and other stakeholders. Accordingly
ESG matters have been added as a principal risk.
• The risks in relation to Portfolio Management and Capital
•
Allocation have been combined.
In relation to principal risks brought forward from 2019, the Board
considers that the market conditions risk, supplier risks and the
changing customer and competitor landscape risk are increasing.
All other risk trends are unchanged.
Emerging risks
As part of the overall risk assessment process, and in line with the
requirements of the UK Corporate Governance Code, we capture and
monitor areas of uncertainty that do not currently present a significant risk
but which have the potential to adversely impact the Group in the future.
These emerging risks are identified from regular reviews of risk research
and other publications, alongside perspectives on emerging risks collated
from assessments made by the business unit and functional leadership
teams and the results of assurance activities. The emerging risks
considered by the Board during 2020 included sustainability and climate
change matters, digital technologies and, as a result of the pandemic,
the impacts of changes to working locations and ways of working.
Travis Perkins plc Annual Report and Accounts 2020
45
Financial statementsGovernanceStrategic report
Statement of principal risks and uncertainties continued
Risk
description
Market conditions
Pandemic
Our markets are highly fragmented and cyclical in nature and
performance is affected by general economic conditions and a
number of specific drivers of construction, repairs, maintenance and
improvement and DIY activity. These include the volume of housing
transactions, driven by mortgage availability and affordability, house
price inflation, the timing and nature of government activity to
stimulate activity, net disposable income, consumer confidence,
interest rates and unemployment levels.
The fundamental long-term market drivers remain robust despite
Covid-19 related uncertainty in the short-term. Whilst a number of
longer-term themes are beginning to impact the industry, these
present us with both opportunities and risks in responding to the
changes:
• Traditional ways of working in the industry will change, driven by
technology and an increasing move to modern methods of
construction.
• There is a need to address a growing productivity challenge in the
construction sector alongside an increasing scarcity of technical
knowledge, which will hinder industry growth if unaddressed.
• There is a drive for greater digitisation, which has accelerated as a
result of the pandemic.
The Covid-19 pandemic has significantly impacted our operations
and results in 2020. It is not clear how long the pandemic will last,
how much more extensive it may yet become, what impact further
virus variants could have, how quickly approved vaccines will be
distributed and how effective they prove to be, or what further
measures may be introduced by governments to mitigate the
associated health, economic and societal impacts.
Central UK Government, and the devolved authorities in other parts
of the UK, have deemed the Group to be an essential provider to
ensure critical national infrastructure remains operational and homes
remain warm and dry. Any change to this status would significantly
impact our operations and results.
The pandemic may lead to a significant and prolonged impact for
the Group in respect of:
• Operational disruption resulting from high levels of colleague
absence, attempts to contain an outbreak at a Group location or
further measures taken to contain virus peaks, whether localised
or national. This could impact our ability to operate our branch
and distribution network, or provide functional support to the
business, if this cannot be delivered remotely.
• The ability to deliver and measure social value will become
• Pressure on colleagues to adapt to rapidly changing
fundamental to long-term success.
We must also manage the impacts of changing building standards
and the UK Government’s future framework for heat in buildings
through the products and services that we offer.
circumstances, ways of working and resourcing levels, which may
impact their health and well-being.
• Disruption to our supply chain, which operates across multiple
territories. In addition to the proximate disruptive effects of the
pandemic, the supply chain may also be impacted by business
closures and consolidation activity.
• Levels of consumer confidence in an uncertain economic
environment, which may adversely impact demand for our
products and services.
Impact
• Adverse effect on financial results
• Loss of market share
• Detrimental impact to health and well-being
• Adverse effect on operations, financial condition and results
Risk
mitigation
Our businesses all hold #1 or #2 positions in their chosen markets.
We maintain a comprehensive tracking system for lead indicators
that influence the market for the consumption of building materials
in the UK.
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.
Significant events that may affect the Group are monitored by the
Group Leadership Team 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, changing the focus or lowering capital
investment and reducing the dividend.
We have established a number of partnerships to explore
opportunities to work with companies involved in modern
methods of construction.
We acted quickly to respond to the challenges posed by Covid-19
with the safety and well-being of colleagues and customers our
overriding priority in our continued response to the pandemic.
Tiered crisis response teams were mobilised before the first UK
lockdown to coordinate activity. These teams continue to monitor
the situation closely, with regular oversight from the Board, and
update measures, advice and communications as required.
Colleagues have been regularly consulted with throughout the
pandemic and are empowered to call out unsafe practices. Several
incidents in recent months suggest that Covid-19 has been an
influencing factor both in terms of the physical and mental impacts to
colleagues of adapting to changed ways of working, and as a necessary
area of focus which may divert attention from more typical operational
hazards. Organisation-wide safety stand down briefings were run in
2020 for colleagues to reflect and consider individual and collective
actions that can be undertaken to take responsibility for their own and
each other’s safety. Other major response measures include:
• Rapid changes to the network to enable contactless collections
and socially distanced service.
• Enhanced hygiene routines and provision of PPE.
• Supporting all colleagues able to work from home to do so, which
will continue for the foreseeable future.
• Active, detailed management of cost and cash flow, including the
suspension of the 2019 final dividend, a 20% reduction in Board
and Executive pay for three months and the deferral of rates and
VAT payments.
• Regular communications to colleagues including a weekly pulse
survey and extended well-being support.
46
Travis Perkins plc Annual Report and Accounts 2020
Other information
Changing customer & competitor landscape
Supplier risks
We face a number of risks in relation to key supplier dependencies
and relationships, overseas sourcing and disintermediation, all of
which could adversely impact upon ranging and price.
We are the largest customer to a number of our suppliers. In some
cases, those suppliers are large enough to cause us significant
difficulties and disruption if they are unable to meet their supply
obligations, whether due to 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 and prolonged stock-outs, adversely impacting
customer service and, potentially, leading customers to switch to a
competitor in the short- or long-term.
We source a number of products from overseas factories, which
increases our exposure to quality, warranty, ethical and currency
issues. This again may adversely impact customer service and choice.
Manufacturers of the materials and products that we sell may also
look to sell directly to end customers in the future, diminishing the
role of distributors.
Risk
description
The evolution of customer behaviours has accelerated through the
pandemic and this is expected to continue. Forced to move to more
remote transactions, customers looked for digitally-enabled
solutions. Whilst this drove an immediate focus on our digital
transaction capabilities, the ability of these platforms to meet
customer demand and keep pace with competitor developments
will impact longer-term growth and delivery of our strategy.
The process of digitisation introduces alternatives beyond our
traditional competitors and, through the move to more online
purchasing, there is increasing price transparency. This puts
pressure on the margin that can be achieved on distributed
products in some instances.
The balance of delivered sales has moved significantly during the
pandemic and our ability to develop this area and provide innovative
fulfilment solutions will be a key differentiator. Customers also
increasingly value the ability to procure services that complement
their project, presenting us with both an opportunity and risk to
meet that expectation.
Increased focus on delivery and fulfilment may draw other new
entrants into the market who operate business models which differ
significantly from the traditional merchanting, retail and online
formats from which we currently operate. There is also an ongoing
level of portfolio change among our more established competitors.
Both present potential threats to the leading market share positions
of our businesses.
These changes in the customer and competitor landscape,
individually or in combination, may adversely impact the profitability
of branch-based operations, impact pricing perceptions and, as a
result, negatively impact our overall performance.
Impact
• Adverse effect on financial results
• Loss of market share
• Adverse effect on financial results
• Adverse effect on reputation
Risk
mitigation
The Board is cognisant of the risks presented by the changing
customer and competitor landscape and evaluates developments
both in terms of threats and opportunities for the Group.
Competitor activity is closely monitored, including potential
consolidation activity.
We have made significant progress in 2020 towards digitising
key customer journeys and building tools that complement our
existing operations and enable customers to transact with us
through channels that best suit their needs. Initially focused on
the General Merchant business, these tools build on the existing
high levels of digital engagement enjoyed by the Wickes and
Toolstation businesses.
High quality fulfilment of customer orders remains the main service
differentiator across Trade businesses. This is an area of ongoing
focus for us and will combine with the digital enablement initiatives to
give better visibility and more choice to customers. The Group
appointed a Fulfilment Director in 2020 to focus these efforts.
We are able to use our sites flexibly to respond to changes. Alternative
space utilisation models are possible, including maintaining smaller
stores and implanting additional services into existing branches. The
programme of restructuring announced in June 2020 progressed our
existing strategy to operate from fewer, larger branches with a greater
breadth and depth of product range.
Pricing strategies across the Group are regularly reviewed and
refined to ensure they remain competitive.
Making decent returns is one of our cornerstones and drives us to
treat both customers and suppliers fairly. We have established
strong relationships with our key suppliers and work closely with
them to agree contracts that are mutually beneficial. We conduct
due diligence in line with our commitment to responsible sourcing,
and to ensure a continuous supply of quality materials.
Where possible, contracts exist with more than one supplier for key
products, to reduce the risks of dependency on a sole supplier.
Activities undertaken in preparation for Brexit and the end of the
transition period, including increased supplier liaison, mapping
in-bound supply chains to identify potential exposures and holding
buffer stocks in certain categories, has assisted in the understanding
and mitigation of our supplier risks.
We have made a significant investment in our Far East infrastructure
to support our direct sourcing operation. This allows the development
of own brand products, thereby reducing the reliance on branded
suppliers. We have also adopted a conservative hedging policy to
reduce our exposure to currency fluctuations.
Independent checks are undertaken on the factories producing
products for the Group, including the ethical, safety and
environmental performance of the site and the quality and suitability
of products before they are shipped to the UK. The results of these
checks are kept under review with action taken as necessary to
address any concerns.
Travis Perkins plc Annual Report and Accounts 2020
47
Financial statementsGovernanceStrategic report
Statement of principal risks and uncertainties continued
Portfolio management
Change management
We undertake a variety of projects throughout our businesses in
order to generate returns for our shareholders. These projects
include the modernisation of the Group’s core IT systems and
infrastructure and, in direct response to the challenges of the
pandemic, changes to methods of customer fulfilment and a
drive for process simplification in relation to rebates and simplified
pricing templates.
By their nature, major change programmes are often complicated,
interlinked and may require considerable resource or specialist
expertise to deliver. As a result, the expected benefits, timescale
for delivery and the costs of implementation of each project may
deviate from those anticipated at the outset. Colleague engagement
may be impacted during a period of significant change and
cost-focus.
Risk
description
We manage a number of businesses in the UK which operate in
different, but complementary sectors. As the markets we serve
continue to develop, we are investing to enhance our existing
businesses and also to develop new propositions to better serve
our customers.
We undertake acquisition and disposal activity to optimise our
portfolio of businesses and drive shareholder returns. In December
2018, we announced a strategy to simplify the Group and
concentrate on our trade-focused businesses. Although the
Covid-19 pandemic led us to pause the planned demerger of
Wickes during 2020, we completed the disposal of the Tile Giant
retail business in September 2020.
Programmes to separate and prepare businesses for sale or
demerger can be complex given the many linkages to our systems
and processes. More generally, the projected benefits, costs and
timescale for portfolio management activities may deviate from
those originally planned, which could in turn impact the progression
of the process and the value realised or price paid.
Although we operate a disciplined capital allocation process, there
is a risk that we over-invest in channels which may decline or are
non-core. It is also possible that we may not allocate sufficient
capital to new propositions and advantaged businesses resulting in
suboptimal returns on capital.
Impact
Risk
mitigation
• Adverse effect on financial results
• Adverse effect on shareholder value
• Adverse effect on reputation
• Adverse effect on financial results
• Adverse effect on shareholder value
• Adverse effect on colleague engagement
All merger, acquisition and disposal activities are subject to a
detailed appraisal process and ultimate approval by the Board.
All potentially significant projects are subject to detailed
investigation, assessment and approval prior to commencement.
We put in place a formal programme of work, with dedicated
resources, for larger-scale transactions. External expertise and
advisors are involved as required to support the programme teams.
All activity of this kind is supported by robust governance and
monitoring. The largest programmes are closely monitored by a
programme Steering Committee, with sponsorship and
representation from members of the Group Leadership Team and,
when appropriate based on the significance of a transaction, the
Board. Both the Group Leadership Team and the Board receive
regular updates on all portfolio management activities.
Responsibility for identifying and implementing opportunities to
expand, improve or modify our operations rests with each of the
business unit leadership teams. We deploy or redeploy capital
through a Group-level forum to strategically-aligned projects
expected to achieve the best return on capital. Projects are required
to present a comprehensive business case and, for the largest
investments, Board approval is sought.
Major projects are reviewed monthly by the Group Leadership Team.
Post implementation reviews are undertaken of all major projects
and returns are monitored on an on-going basis to ensure that the
expected returns are achieved, but also to allow us to modify the
allocation of capital when appropriate.
We allocate dedicated teams, including finance colleagues, to each
project, with additional expertise being brought in to supplement
existing resources when necessary. Regular communications are
undertaken to keep colleagues informed.
All major programmes are supported by an appropriate governance
structure and are closely monitored through the Group Leadership
Team’s monthly programme review with regular reporting to the
Board. When projects do not deliver against expectations, we
undertake exercises to capture the ‘lessons learned’ which are fed
into future projects.
Recent enhancements of the Group’s digital capabilities have been
delivered using a more agile, incremental approach to change.
Whilst we continue to embed the approach, it has been successful
in supporting a more rapid development of solutions which can be
ring-fenced, trialled and assessed before wider deployment.
Although this approach is lighter on formal project management
and governance in the earlier stages, we have implemented robust
gateways to manage the risks of wider deployment.
48
Travis Perkins plc Annual Report and Accounts 2020
Other information
ESG
IT systems and infrastructure
Risk
description
Our operations are impacted by, and impact upon, the environment,
society and the economy and we are committed to the promotion of
sustainable, ethical and inclusive business practices amongst our
customers, suppliers and colleagues. This commitment promotes a
sustainable and value-generating business model, underpinning our
strategy, and more fundamentally recognises our responsibility to
take action and influence the wider industry now, to mitigate the
significant threats to the planet posed by climate change.
In our day-to-day operations we are dependent on a wide range of
IT systems and supporting infrastructure and technology plays a
significant role in our strategic ambitions.
Our current IT landscape is complex and includes legacy systems
that lack the functionality of modern software and where expertise
is diminishing.
Growing risks in relation to Environmental, Social and Governance
(“ESG’’) matters require us to regularly identify our most material
responsibilities and challenges in order to target investment and
manage them well. This includes investment in the decarbonisation
of the fleet and estate, and engagement with the wider construction
products industry to reduce supply-chain and product carbon,
taking action to prevent the worst impacts of climate change.
In addition, ESG matters are increasingly of interest to our
customers, investors and other stakeholders, driving changes to
demand and expectations, which we must identify and respond to.
Impact
• Adverse effect on reputation
• Competitive disadvantage
• Adverse effect on financial and operational performance
• Less attractive as an investment proposition
• Potential legal action, fines and penalties
Whilst older systems present an increasing risk of failures or
outages and require more effort to maintain, of greater significance
is the risk that our current systems hinder the delivery of the
strategy, whether technologically or in diverting resources.
In adopting a more agile, incremental approach to business change,
enabled by technology, we will need to manage an extended period
of change where old and new technologies must successfully
co-exist. There is significant risk associated with IT-enabled
business change programmes including risks in relation to
prioritisation and sequencing, resource allocation, cost and time
overruns, testing and business acceptance. These risks, alone or in
combination, could impact our short-term performance and
achievement of our longer-term strategy.
• Adverse effect on financial and operational performance
• Adverse effect on delivery of strategy
• Competitive disadvantage
Risk
mitigation
A Group Code of Conduct is in place, underpinned by policies,
which cover our ESG and ethical requirements.
Whilst we are currently reliant on older infrastructure and
applications, adequate resources and processes are in place to keep
the current state well maintained and operational.
Our Head of Sustainability undertakes regular materiality
assessments, consulting with broad stakeholder groups, to
determine the most material ESG risks and opportunities facing the
Group. These are agreed by the Group Leadership Team and the
Board. We have determined accountabilities throughout our
businesses to manage ESG material focus areas, including Group
Leadership Team sponsorship of each topic. A suite of Minimum
Standards is being implemented to maintain a strong core.
We have set commitments for each focus area including an
industry-leading commitment on carbon reduction. We allocate
budget to meet the stated commitments and progress on key
strategic initiatives is regularly monitored by the Group Leadership
Team.
We have put in place a programme of independent audits to assure
compliance with our most significant regulatory requirements in
relation to ESG matters.
To mitigate the risk of disruption in the event of a system failure, an
IT disaster recovery plan is in place, together with broader business
continuity plans. Arrangements are in place for alternative data sites.
Off-site back-up routines are in place. Plans are regularly tested and
the results assessed to drive further improvements. Our incident
management process is designed to prioritise and respond to any
incident quickly and effectively, with escalation and communication
protocols. Recovery targets are in place and are designed to
minimise the operational and customer impact.
We have an evolving modernisation plan that will drive business
benefits and lead to the replacement of a number of legacy
systems. This will bring greater capability and longevity to our
systems and infrastructure.
A governance structure is in place for IT change programmes from
idea generation through to deployment. This includes protocols, to
ensure that upgrades and improvements are delivered to the
business in a controlled manner that limits the potential for
disruption. The Group Leadership Team receives regular progress
reports and larger programmes are reported to the Board.
Every programme is assessed at completion as to the lessons
learned. Insights are rolled into future change programmes.
Travis Perkins plc Annual Report and Accounts 2020
49
Financial statementsGovernanceStrategic report Statement of principal risks and uncertainties continued
Risk
description
Cyber threat & data security
People
Incidents of sophisticated cyber-crime represent a significant and
increasing threat to all businesses including the Group. As we seek
to meet our customers’ increasing digital expectations and drive
competitive advantage in this area, the underlying data is attractive
to external attackers whose methods and global footprint are rapidly
evolving. There is therefore a balance to be struck between
increased digitisation and availability of data against the risks that
such activities introduce.
Incidents impacting the confidentiality, integrity and availability of
our data and systems could result in disruption to customer-facing,
supplier-facing and financial systems through theft and misuse of
confidential data, damage to or manipulation of operationally critical
data or interruption to our IT services, any of which may have
serious consequential impacts on our reputation, ability to trade and
compliance with regulations including GDPR.
We assess our main risk of attack to be from opportunistic criminals
seeking financial gain from the theft and sale of personal data.
During 2020, the Covid-19 pandemic appears to have heightened
this risk and we have seen an increase in the volume, frequency and
sophistication of attempted cyber-attacks during this period, which
is expected to continue. We also face internal risks of data loss or
leakage as a result of actions taken by colleagues, whether
accidental or deliberate. Our strategy to modernise and digitise
capabilities also presents a further dimension to cyber and data
security risk.
People are key to our success. Our ability to recruit, develop, retain
and motivate suitably qualified and experienced staff is an
important driver of our overall performance.
The strength of our customer proposition is underpinned by the
quality of our people, particularly those in branch and other
customer facing roles. Many colleagues have worked for us for
many years, during which time they have amassed valuable product
and customer knowledge and expertise. Retaining those colleagues
is key to continuing high levels of customer service and maintaining
our competitive advantage.
Ensuring the retention and development of our employees, and that
robust succession plans exist for key positions, is important for us to
ensure that we have the right skills and experience to deliver on our
strategic objectives.
We are exposed to skills shortages in certain areas which can result
in salary cost pressures. In particular, the availability of suitably
qualified commercial drivers remains an area of ongoing focus,
which is critical to the operation of our fleet to meet customer
delivery expectations.
We recognise the benefits of a diverse workforce and an inclusive
workplace, to ensure that everyone feels welcome, valued for their
contribution and able to perform at their best. Making progress in
this area will take time and there is a risk that we are unable to move
quickly enough to capture the benefits or meet colleague and
customer expectations.
Impact
• Operational disruption
• Adverse effect on reputation
• Potential legal action, fines and penalties
• Adverse effect on delivery of strategy
• Competitive disadvantage
• Adverse effect on reputation
Risk
mitigation
We take our responsibilities and legal obligations in respect of data
security and protection seriously and continue to focus on a
combination of people, process and technology to help minimise
the likelihood and impact of cyber incidents.
Strategic initiatives are in place in relation to diversity and inclusion
and knowledge management. Further information on progress
made during the year can be found in the Diversity and inclusion
report on page 62.
Alongside user awareness and education, best of breed security
controls and technologies are key to reducing the likelihood of an
attack and are regularly tested. These include firewalls, virus
protection, email threat protection, intrusion detection and
vulnerability scanning. All changes to technology solutions require
Information Security review and approval.
Action was taken this year to further develop our security profile and
maturity against the internationally recognised National Institute of
Standards and Technology – Cyber Security Framework. During
2020 we successfully introduced a 24/7 security operations centre
capability to monitor for suspicious activity and behaviours and
work with resolver teams as required.
We have a cyber-incident response protocol, which is updated with
lessons learned from responses to attempted attacks on the Group
and external cases. Third party forensic capability is in place, should
it be needed, to support our ability to respond rapidly and effectively
to an incident, restore systems and demonstrate compliance.
We will prioritise a number of security focused programmes in 2021
to further minimise the risk profile. This includes programmes
focused on maintaining GDPR compliance and the optimisation of
security technology.
The Group’s employment policies and practices are kept under
regular review.
Staff engagement and turnover by job type is reported regularly to
the Group Leadership Team and the Board.
An established talent and succession process is in place, which will
be reviewed and refreshed in 2021. The process is run annually with
plans for the most senior and critical roles reviewed by the Board.
The Group’s reward and recognition systems are actively managed
to ensure high levels of employee engagement. Salaries and other
benefits are benchmarked regularly to ensure that the Group
offering remains competitive and the Group operates incentive
structures to ensure that high performing colleagues are adequately
rewarded and encouraged to remain with the Group.
A wide range of training programmes are in place to encourage staff
development. Management development programmes are available
to those identified for more senior positions. The Group’s
award-winning “Learn and Earn” Apprenticeship Programme
(“LEAP”) has been in place for a number of years and has a track
record of successful delivery of apprenticeships in both branch-
based and functional roles.
50
Travis Perkins plc Annual Report and Accounts 2020
Other information
Health, safety & well-being
Legal compliance
We are subject to a broad range of existing and evolving governance
requirements, environmental, health and safety and other laws,
regulations, standards and best practices which affect the way that
we operate and give rise to significant compliance costs, potential
legal liability exposure for non-compliance and potential limitations
on the development of our operations and strategy.
Risk
description
Keeping our colleagues, customers, suppliers and the public safe is
a cornerstone of the business and at the heart of how we operate.
We expect everyone to go home to their families safely every day.
We operate a large estate, with many sites running complex and
busy yards. We also operate one of the largest vehicle fleets in the
UK, distributing heavy and bulky materials. Certain products that we
sell pose health and safety risks. Poorly implemented safety
practices on site, on the road and at delivery locations could result in
significant harm to our colleagues, customers and the wider
community.
The Covid-19 pandemic has had a profound impact on the Group
and presents new risks to the health and well-being of our
colleagues and the safe operation of our businesses. The tactical
steps we have taken to respond to the challenges of the pandemic
are set out in the separate Pandemic risk.
Impact
Risk
mitigation
• Harm to our colleagues, customers or the public
• Potential legal action, fines and penalties
• Adverse effect on reputation
• Adverse effect on reputation
• Adverse effect on financial and operational performance
• Potential legal action, fines and penalties
Health, safety and well-being is one of our fundamental values. We
continue to challenge our thinking and approach to improving safety
performance through our well established “Stay Safe” brand. Steps
have been taken in 2020 to build on our reporting programme and
empower colleagues to “Call It Out” if they see anything that they
consider to be unsafe. Guidance has been issued to support
colleagues through difficult customer conversations. Regular
communications highlight examples where “calling it out” has
avoided a safety issue, which is helping to generate an even more
open reporting culture around safety.
Governance of Stay Safe is well established and designed to
promote a continual focus on health and safety. Stay Safe
performance is reviewed at all Board meetings, by the Group
Leadership Team, by every business leadership team and by
the dedicated Stay Safe Committee, which is chaired by a
Non-executive Director. In these forums we also monitor the
achievement of transport compliance requirements. The Fleet
team has recently been restructured and is in the process of
delivering improvements against a Fleet and Driver roadmap,
continuing into 2021.
Incidents are monitored, investigated and corrective action taken to
address the root cause. For more significant incidents, an Incident
Review Board is held, with the lessons shared across the Group.
We have increased our focus on mental health and well-being in
2020, introducing a range of resources to colleagues and
supporting the wider construction industry’s “Stop. Make a Change”
campaign in October.
De-risking our operations and improving health, safety and
well-being awareness are at the forefront of our activities. Further
information on progress made during the year can be found in the
Safety and well-being Report on pages 56 to 57
The General Counsel’s Office is responsible for monitoring changes
to laws and regulations that affect the business and is supported by
external advisors. The Group Leadership Team and the Board
regularly monitor compliance with laws and regulations.
We have implemented a new Code of Conduct that sets out our
requirements for doing business in the right way. This is
underpinned by a comprehensive framework of policies. Those
expectations are disseminated using a range of methods to ensure
that our colleagues understand their responsibilities to comply with
the law and other regulations affecting the Group at all times. We
share Supplier Commitments with our suppliers to articulate our
expectations and higher risk suppliers are assessed against these
requirements using an Online Risk Assessment.
We appointed a Corporate & Regulatory Risk Business Partner in
late 2019 to support the business in meeting new requirements and
to continue to develop and improve the existing framework.
Our new Code of Conduct is the first phase in our strategy to deliver
an enhanced assurance framework to further support regulatory
compliance across the Group. Areas of initial focus include Money
Laundering, Competition Law, Anti-Bribery and Corruption and
Corporate Criminal Offences. The second phase, already underway,
is to implement a suite of Minimum Standards that support policy
adherence. Crucially this will also assist in our assessment of the
maturity of Group-wide processes and controls across the 12
ESG material focus areas identified by the Board, of which Legal
Compliance is one.
We provide online training to colleagues in key areas of legal and
regulatory compliance, including mandatory modules for those
joining the Group.
We operate a speaking up process that allows anonymous
reporting, through an independent hotline, of any suspected
wrongdoing, unethical behaviour or instances of non-compliance
with laws and regulations. All reported cases are investigated. This is
being updated following the implementation of our new Code of
Conduct in order to further improve awareness and access across
our businesses and supply chain in all relevant countries.
Travis Perkins plc Annual Report and Accounts 2020
51
Financial statementsGovernanceStrategic report Sustainability overview
Doing the right thing
The Group is committed to lead on the Environmental, Social and Governance (“ESG”)
agenda. A leadership position in ESG is essential to drive meaningful change across the
industry and to meet stakeholders’ growing expectations. The framework below highlights
12 material ESG focus areas for the Group and demonstrates the supply-chain wide
approach. Progress will build resilience in the business, underpin a robust social value offer
to customers and improve behaviours in the supply chain.
A year of change
Set an appetite to lead on ESG
in the industry and defined
six leading commitments
Committed to achieve Net
Zero for Scope 1 and 2 carbon
by 2035
Strengthened ESG
governance with a new Code
of Conduct and Minimum
Standards framework
During the year the Group stepped up its focus on ESG, building upon
its progress to date. Leading ambitions were set in carbon, diversity
and inclusion, people development, safety and well-being, sustainable
products and services, and responsible sourcing. This included the
development of a new, ambitious net zero carbon target. The Group
Leadership Team and the Board have approved the Group’s
commitments and leading ambitions as shown in the framework.
2020 rightly had a strong focus on health, safety and well-being as
the Group navigated the pandemic, always putting colleagues’ and
others’ safety first. The Group also took the opportunity to “strengthen
the core” across all material focus areas, developing new policies and
minimum standards to support the Group’s businesses.
To be updated
6 Leading commitment
focus areas
6 Strong core focus areas
A supply-chain wide approach
52
Travis Perkins plc Annual Report and Accounts 2020
Other information
Engaging with stakeholders
The Group actively engages with
stakeholders to share progress, inform
plans, listen to feedback and seek views.
Shareholders are encouraged to attend the
Annual General Meeting to understand and
ask questions about the Group’s
performance, challenges and opportunities.
Colleagues, customers, suppliers and
investors were consulted on our new
framework and targets in 2020. We
conducted pulse surveys throughout the
Covid-19 pandemic to understand and
support our colleagues’ needs. We have
adapted to new ways of working due to
Covid-19 restrictions, engaging with our
stakeholders virtually to ensure the
conversations continued.
Governance of sustainability
The Board has overall responsibility for
sustainability. The Head of Sustainability
supports the Group in evolving and
delivering against its sustainability strategy.
Each of the material focus areas has a
Group Lead, nominated Leads and
Leadership sponsors in each business.
Progress is reported to the Group
Leadership Team and the Board on each
material focus area to monitor and improve
performance. A separate Stay
Safe Committee of the Board oversees
performance in health and safety.
Objectives or targets are set for each
material focus area.
Defining the material focus areas
The material focus areas of the Group’s
sustainability programme were determined
through in-depth consultation with a wide
group of stakeholders, taking into account
key risks and opportunities. An ESG
materiality assessment was completed
during 2019 and revisited in 2020, involving
colleagues, the Group Leadership Team and
a range of different customers, suppliers and
investors. The Group’s approach has been
benchmarked against competitors, supply
chain partners and leaders from other
industries. Changing industry needs,
upcoming regulation and macro-economic
trends have been taken into account. The
Group’s material focus areas will be reviewed
on an ongoing basis to keep the Group
focused on the most important topics for the
business and its stakeholders.
Our leading commitments
Focus area
Safety and
well-being
Carbon
Development
Diversity and
inclusion
Sustainable
products and
services
Responsible
sourcing
Relevance to the Group – managing key risks and opportunities
The safety and
well-being of
colleagues is the
Group’s first priority.
A workforce that is
safe, and physically
and mentally healthy,
is the foundation
of everything the
Group does.
The Group operates
a large vehicle fleet
and property estate.
The Group has a
responsibility to
address rising
stakeholder concern
around climate change
and mitigate the
impact of increasing
energy prices and
carbon taxes.
A strong pipeline of
talented people
protects the current
and future success of
the Group. In an
industry that is keen to
attract young talent,
development
programmes allow the
Group to retain existing
colleagues and nurture
new recruits.
A diverse workforce
and an inclusive
workplace ensures
everyone feels
welcome, valued for
their contribution and
can perform at their
best. It also allows the
Group to build
employee pride and to
mirror and better serve
its customer base.
Building regulations,
national commitments
and construction
methods are always
evolving. The Group
can support its
customers with
information, products
and services to meet
changing requirements.
The Group sources
products and services
from thousands of
suppliers. Responsible
sourcing of quality
products from
approved suppliers is
essential to establish
resilient and
transparent supply
chains and protect the
Group from interruption
or reputational damage.
Our desired outcomes
Everyone home safe
and well, every single
day
Lead the industry in
tackling climate change
Upskilled colleagues
delivering outstanding
service
Industry-leading
inclusive and diverse
employer
Facilitate customers to
“build back better”
Known, trusted, ethical
and sustainable supply
chains
Our 2021 commitments
Net zero carbon by
2035 (Scope 1 and 2),
with 80% reduction
and 20% offset
Set a Scope 3 carbon
target by July 2021
Continue to safeguard
colleagues and support
mental well-being,
driving a culture of
“Calling It Out”
Develop a network of
mental-health first
aiders and implement
business-led well-being
plans
Make TP a career
destination of choice
for the best people and
build a development
curriculum and
framework to achieve
this
Thousands more
apprenticeships in
2021: 500 internal and
500 new recruits
Establish a diversity
and inclusion advisory
board to work with the
GLT and define
appropriate targets
Build business-level
plans that increase
focus on diversity and
inclusion
Work with customers to
understand their
sustainability needs so
that the Group can
develop ESG value-add
services and better
promote sustainable
products to them
Source 100%
sustainable timber
(FSC or PEFC)
Continue to roll out the
improved online risk
assessment and the
new site audit formats
Travis Perkins plc Annual Report and Accounts 2020
53
Financial statementsGovernanceStrategic report Our strong core
Focus area
Colleague
voice and
engagement
Modern
slavery and
human rights
Legal
compliance
Waste
Reward and
benefits
Community
and charity
Relevance to the Group – managing key risks and opportunities
A business should
meet the needs of
multiple stakeholders,
not just shareholders.
Colleague opinion and
input is sought to
support and inform
decision-making,
increase engagement
and drive innovation.
The Group employs
28,710 people.
Ensuring colleagues
and workers within the
supply chain are
protected from abuse
of their human rights is
a fundamental aspect
of the Group’s social
responsibility.
Millions of products
pass through the
Group’s businesses
each year, generating
operational, product
and packaging waste.
Public interest in
plastics and packaging,
increasing waste costs
and new taxes all drive
this agenda.
As a responsible
business, it is Company
policy to comply with
all applicable laws in
the countries in which
the Group operates.
Whether anti-bribery
and corruption, General
Data Protection
Regulation (“GDPR’’),
competition
compliance or any
other area of law, the
Group will do the right
thing.
Effective reward and
benefits programmes
allow the Group to
attract, motivate and
retain the best talent in
a competitive
marketplace.
Well-structured and
strategy-aligned reward
and benefits packages
support colleagues to
meet their current and
future financial,
emotional and physical
well-being needs.
The Group’s businesses
are based on
relationships. Local
branches forge strong
bonds with local
communities. Sales
teams collaborate with
customers on Social
Value propositions.
Colleagues devote time
and money to chosen
charities. Being a good
corporate citizen is core
to the Travis Perkins
Group.
Our desired outcomes
Committed colleagues,
empowered to drive
change
Slavery-free business
and supply chains
Consciously doing the
right thing
Play our role in the
move to a circular
economy
Simple, transparent
and effective rewards
which engage and
motivate colleagues
Partnerships that
optimise social value
Our 2021 commitments
Review colleague
engagement surveys
and continue to engage
colleagues through
existing forums
Enhance the Group’s
feedback strategy
Continue to train key
colleagues on
identifying and
managing slavery risks
Launch refreshed
training on key legal
compliance topics in
2021
Continue to roll out the
improved online risk
assessment and site
audit formats
Eliminate avoidable
single-use packaging
by 2025
Work with suppliers to
meet the new plastic
tax requirements and
reduce packaging
Simplify and refocus
incentives and bonuses
Increase colleague
confidence in managing
pensions and finances
through targeted
communication and
education
Extend the focus on
community and charity
beyond fundraising to
create positive impacts
in the communities
where the Group’s
colleagues and
customers live and
work
54
Travis Perkins plc Annual Report and Accounts 2020
Sustainability overview continued Other information
Being at the forefront of evolving industry trends and regulations is
important for the Group’s customers and for maintaining the
leadership positions of the Group’s businesses. The commitment to
responsible sourcing supports the deep and lasting supplier
relationships that enable the Group to provide quality products and
services to its customers. For more information on the business
model and strategy see pages 16 to 25.
How does this support the strategy?
By doing the right thing, the Group has confidence in a sustainable
and value generating business model. The sustainability programme
supports the Group’s long-term strategy, building on its 200+
year heritage.
The Group delivers best-in-class service by investing in its colleagues
and its unique and open culture, continually striving to be the best
employer. The Group operates through a nationwide network of
around 2,000 branches who win the custom of the “best builders
in town” by building strong bonds with their customers and their
local communities.
How does this align with the cornerstones?
Everything the Group does is underpinned by the five cornerstones, or
principles, of the business. The material focus areas highlight what the
Group does on sustainability and the cornerstones define how the
Group does it.
Upholding
family
values
Keeping
people
safe
Making
decent
returns
Working
for our
customers
Being
the
best
Assessing climate-related financial risks and
opportunities
The Group has submitted an annual climate disclosure to the Carbon
Disclosure Project (“CDP”) for 11 years, including a financial assessment
of climate-related risks and opportunities. Work is underway to disclose
climate-related financial risk in the Annual Report and Accounts by
2022, in line with the Taskforce for Climate-related Financial Disclosure
(“TCFD”) recommendations. During 2020 the Group developed a new
Climate Change Risk Assessment process and a training webinar to
better engage business leaders in this assessment. In 2021 the full
TCFD analysis will be completed, assessing risks against different
climate scenarios.
Alignment with the UN Sustainable
Development Goals
By doing the right thing, the Group is supporting a number of the UN
Sustainable Development Goals (“SDGs”). Of the 17 UN SDGs, seven
align most directly with the Group’s sustainability programme .
Travis Perkins plc Annual Report and Accounts 2020
55
Financial statementsGovernanceStrategic report Safety and well-being
2020 objectives
• Maintain focus on reducing and managing key safety risks and continue to externally benchmark
performance and improvement activities.
• Raise the bar on mental health awareness and progress defined business improvement plans.
• Share learnings externally from strengthened controls to address compact yellow plant safety in
order to improve industry standards.
2020 progress
The Group’s safety performance during 2020 was adversely affected
by Covid-19, particularly between March and June when there was a
sharp rise in the number of lost time incidents (“LTIs’’). LTIs increased
as a result of illness and shielding reducing the number of colleagues
in branches, and the disruption of the rhythm of work created by
lockdown and furlough.
The business responded to this in a number of ways including:
• Closing Travis Perkins branches on Saturday mornings in the
summer to give colleagues extra recovery time
• Keeping branches closed where there were not enough colleagues
available to operate safely
• Holding “safety stand-downs” to help colleagues renew the focus
on safe working.
As a result of these factors, the Group’s LTI frequency rate in the year
increased by 2% to 5.63 LTIs per million hours worked (2019: 5.52).
The severity rate outperformed 2019, reducing by 12.5% to 0.07 lost
work days per thousand hours worked (2019: 0.08).
Regrettably, the Group was involved in five fatal incidents in 2020.
These dreadfully sad incidents have strengthened everyone’s resolve
to do even more to improve safety. As a result a number of changes
have been introduced:
• The overhaul of the Group’s fleet function and introduction of a
new Fleet and Driver Roadmap which focuses on compliance,
professionalising the role of the driver and creating a fleet fit for
the future. Business units are supported by a dedicated, expert
shared service team.
• The introduction of Incident Review Boards at all levels of the
business, including with the Group Leadership Team, to ensure
that the cultural root causes of incidents are understood and
action is taken to address them.
“Lessons Learnt” sessions at business leadership team meetings
to share lessons from incidents that happened across the Group.
•
Responding to Covid-19
The majority of the Group’s safety and well-being activities during the
year related to the impact of Covid-19.
The Group’s operations were more prepared than most for the virus,
having learnt from how colleagues in the Group’s Shanghai-based
sourcing office coped with the initial outbreak in China. The Group’s
activities spanned from day-to-day crisis management to industry
leadership and included:
• Working with the government and trade associations to develop
safe working guidance for the sector
• Putting in place robust safety management arrangements at a
local level to ensure that branches could provide materials to
essential services safely during lockdown
• Rapidly changing the operating models of all business units to
allow them to continue to trade safely through the different phases
of the pandemic. For example:
– Toolstation and Wickes moved to click and collect only
– Travis Perkins, Keyline and CCF operated delivery-only models
– BSS operated robust controls to remain open to customers
and support essential works including those in hospitals
– Travis Perkins and City Plumbing coordinated a considered and
gradual reopening of trade counter areas
– Wickes, Benchmarx and City Plumbing introduced a “virtual”
customer journey to support the design and purchase of
kitchens and bathrooms
• The application of the Group’s “3 lines of defence for safety”
assurance programme to Covid-19 management, including an
independent audit of the Group’s social distancing principles
• Enhanced mental health support for all colleagues
• Weekly “pulse” surveys to help to understand the mood and
worries of colleagues and enable individual businesses to rapidly
address any well-being concerns.
12
12
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6.1
0.08
0.07
1.5
8.3
0.5
2018
2013
2019
2020
2019
Case study:
HAE Awards
The Travis Perkins Tool Hire business won the SafeHire Plant,
Tool & Equipment Hire Company of the Year category in the
6
Hire Association of Europe (“HAE”) 2020 annual awards.
d
e
k
r
o
w
s
r
u
o
h
n
o
7.21
8.0
6.0
6.7
10
i
l
l
i
8
5.63
5.52
m
i
l
l
i
Catherine Gibson, Managing Director of Tool Hire said: “This
category is judged by the results of external HAE SafeHire branch
audits and is recognition of the improvements made in both the
safety and wider culture of the business in recent years.”
0
r
e
p
s
I
T
L
2020
2.0
0.4
2
0.0
2018
2019
2020
m
r
e
p
s
I
T
L
4
d
e
k
r
o
w
s
r
u
o
h
n
o
4.0
8.3
6.7
6.1
1.5
0.5
0.4
2013
2019
2020
Diverted from landfill
Landfill
Diverted from landfill
Landfill
56
Travis Perkins plc Annual Report and Accounts 2020
Sustainability overview continued
Other information
Accident frequency rate (per million hours worked)
Accident severity rate improved by
5.63
12.5%
2020 improvement activities
In addition to managing the risks arising from the Covid-19 crisis,
various other safety and well-being improvement activities took place
during 2020:
• Continuing the programme of “safety deep dives” to understand
how effectively key risks are managed and externally benchmark
performance. This year the reduced programme focused on
Covid-19 management and night-working
• Supported the construction industry’s “Stop. Make a Change”
campaign and appointed Mental Health First Aiders in Benchmarx
and CCF to help grow the network already established in Wickes
and BSS
• Relaunched the Group’s “safety expectations for suppliers
delivering to branches, stores, distribution centres and customers”,
strengthening requirements and increasing scrutiny.
What’s next?
• Robustly manage the changing risks arising from Covid-19.
• Drive a culture of “Calling It Out” across all parts of the
business.
• Expand the Group’s network of mental-health first aiders and
implement business-led well-being plans.
Case study:
Supporting Toolstation Europe
With a growing number of Toolstation branches across France,
Holland and Belgium, a formalised structure to health and safety
was needed. Lucy Lynch, Managing Director of Toolstation France,
explains: “Taking the Group’s UK-centric approach and working
with local teams and safety experts means that the business now
has a rapidly scalable approach to safety management across all
European countries which will help keep our colleagues and
customers safe whilst we continue to grow.”
Case study:
Calling it out
The Group continuously strives to improve its safety
culture. Incidents in 2020 have shown that the next focus
needs to be helping colleagues have the confidence and
trust to “call things out” and for their managers to receive
their message positively and do something about it.
“The basic mantra is simple - if something doesn’t look or
sound right, it probably isn’t so call it out!”, explains
Richard Byrne, Group HSE & Fleet Director. “It covers a
whole host of areas including diversity and inclusion, data
security and safety.”
Safety is something we cannot compromise on, and nothing is so important that it cannot be done safely.
That people lost their lives as a result of being in contact with our business in 2020 is devastating to us
all. We are a close family and these incidents have had a profound effect on all of us across the Group.
While nothing we do will bring these people back, we have dedicated a lot of time and effort to think about
what each and every one of us must do to make our business safer, and to prevent incidents like this ever
happening again.
Blair Illingworth
Chairman of Stay Safe Committee
Non-executive Director
Travis Perkins plc Annual Report and Accounts 2020
57
Financial statementsGovernanceStrategic report Carbon
2020 objectives
• Set a new long-term carbon reduction target, taking into
account the UK's commitments to net-zero carbon. Develop a
detailed roadmap to support achievement of the new target.
• Complete planned LED replacements, heat pump trials and
lighting and heating “Master switch” trials.
• Engage with commercial vehicle manufacturers to introduce
commercial electric vehicles to the fleet.
• Roll out the Fleet Management System to the Travis Perkins
General Merchant to monitor driver performance, help
increase fuel efficiency and reduce carbon emissions.
• Launch new environmental training packages for colleagues
across a range of roles within the business.
2020 progress
This year saw a significant decrease in the Group’s carbon footprint.
An improvement of 12% on 2019 means an improvement of 45%
against the target of a 28% reduction from 2013 to 2020. Whilst this
has been impacted by Covid-19, the Group had already achieved a
38% reduction by 2019 so the results also reflect the significant
efforts made on decarbonisation over the previous seven years.
During 2020 the Group took the opportunity to develop its
environmental strategy and “build back better”. A net-zero carbon
(“NZC”) plan was developed, outlining how the Group could achieve
its NZC Scope 1 and 2 target by 2035. The key challenge is a vehicle
fleet that accounts for 60% of the Group’s carbon footprint. Solutions
will depend on vehicle development and infrastructure support. The
Group is ready to face this challenge and has engaged with vehicle
manufacturers, fleet operators and leading NZC organisations to
develop the NZC plan.
The Group continued its LED replacement programme despite the
difficult conditions. This included replacing the lighting in 67 branches
and two distribution centres. The Group also installed a further 62
smart electricity meters as part of the wider roll-out programme to
improve monitoring across the estate. A new Fleet Management
System was deployed into the Travis Perkins General Merchant,
saving on fuel consumption through improved driving behaviours.
Case study:
Net zero carbon commitments
The Group is proud to have developed a net-zero carbon plan during
a difficult year. The target is net-zero carbon by 2035 for Scope 1 and
Scope 2 emissions, with a Scope 3 target to be set by July 2021. The
plan was developed by a team of specialist colleagues and outlines
the key actions needed across the Group’s built estate and vehicle
fleet and is supported by a financial business case. The Group is
also aiming to go beyond reducing the Group’s operational carbon
emissions by engaging the Group’s supply chain to reduce
Scope 3 emissions.
Although it has been an incredibly difficult year,
we’ve emerged with an environmental strategy that
includes a clear pathway to net-zero carbon for
Scopes 1 and 2 by 2035. This demonstrates our
commitment to the “green recovery” as part of our
wider aspirations of protecting the environment,
influencing our supply chain and promoting
environmental opportunities.
James Vance
Group Head of Environment
Tonnes of CO2e per £m deflated sales
l
s
e
a
s
d
e
t
a
fl
e
d
m
£
e
2
O
C
f
o
s
e
n
n
o
T
40
30
20
10
0
21.11
18.58
15.13
12,23
9.51
9.49
2013
2019
2020
Transport
Transport
Energy
Energy
2020 target
2020 target
Carbon reduction
per £m deflated
sales since 2013
45%
kWh energy
Annual energy use relating to
gas, purchased electricity and
transport fuel
Scope 14
Direct emissions from burning
gas and solid fuel for heating
and from road fuel use for
distribution
Scope 2
Indirect emissions from our use
of electricity
Intensity5
Emissions from scope 1 and 2
sources per £m of inflation
adjusted sales
Scope 3
Indirect emissions from our
supply chain
2020
UK Non-UK
Total
Energy
531
5
536
2019
Total
–
Carbon Dioxide Equivalent (CO2e) Tonnes
88,372
641
89,013 116,689
32,380
461
32,841
38,736
21.5
0.2
21.7
24.6
Scope 3 emissions are presented in our
publicly available CDP Climate Change
disclosure. Full recalculation is planned in
2021.
58
Travis Perkins plc Annual Report and Accounts 2020
Sustainability overview continued
Other information
Case study:
Decarbonising our fleet: The road to
net zero carbon
The emissions from the vehicle fleet represent approximately
60% of the Group’s Scope 1 and 2 carbon footprint. Progress has
already been made in tackling these emissions through the
implementation of a fleet management system for the
commercial fleet to monitor driver performance. Fuel
consumption is optimised through the reduction of idling and
harsh acceleration or braking. In 2020, a full review was
conducted of carbon from the vehicle fleet and a roadmap to Net
Zero Carbon (“NZC”) by 2035 was developed. The roadmap
includes the introduction of alternate fuels and new technology,
beginning with trials in 2021. The NZC Transport Working Group
consults with vehicle manufacturers to keep abreast of new and
developing technologies and also engages with the UK
Government to improve the UK's charging infrastructure.
Case study:
Decarbonising our estate: The building blocks of
net zero carbon
With an estate of over 2000 sites, the Group has a challenge in
decarbonising its building stock and an opportunity to lead by
example, adopting the low carbon systems and solutions it sells
to its customers. An NZC mapping exercise was completed in
2020 to identify the low carbon technology and investment
needed to meet the Group’s NZC target. The NZC Buildings
Working Group is developing projects to ensure that the
commitment of NZC by 2035 is met. Identified projects include
installations of air source heat pumps, solar PV systems and a
new “low carbon building standard”, setting the bar for all future
new-build projects. Besides new technology, sometimes the
simplest measures save energy, carbon and costs. For example,
in 2020 at a Travis Perkins branch in Milton Keynes, all lighting
and heating controls were interfaced to the intruder alarm,
automatically switching them off when the alarm is set at the
end of the day, preventing wasted energy overnight. Additionally
infrared security cameras, which trigger with motion, removed
the need to flood light the yard throughout the night. These
simple measures saved that one site over £2,000 per year in
energy costs and reduced the site’s carbon footprint.
What’s next?
•
Implementation of the NZC plan, including:
– Trials of alternative fuels in vehicles.
– Continued LED replacement programme.
– Branch incentive programme.
• Full recalculation of Scope 3 footprint and setting of targets.
• Formal accreditation of all carbon targets (Scopes 1, 2 and 3)
using science-based methodologies.
• Development of case studies to showcase to stakeholders.
• Promotion of low carbon sustainable products.
Carbon data table1
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 20202 on an
operational control basis. 95% of Scope 1 and 2 data is from measured sources3 with the remainder extrapolated from either expenditure on
fuel or distance travelled. Specific data points in the carbon chart and the carbon data table, marked with the logo ‘
against Lloyd’s Register verification procedures. For a link to the assurance report see page 64.
‘, have been assured
1. The numbers reported include data for companies where Travis Perkins plc has operational control.
2. Fugitive emissions from domestic refrigeration, vehicles and building air conditioning are excluded as they are not material to the Group’s overall emissions.
3. 5% of data underpinning the 2020 carbon numbers is estimated due to supplier data provision issues.
4. Scope 1 Co2e emissions include 20,402 tonnes from buildings and 68,611 tonnes from transport
5. Carbon intensity is reference to turnover, adjusted to allow for inflation, relative to baseline year. Adjusted sales figures use 2020 Office of National Statistics inflation data.
Travis Perkins plc Annual Report and Accounts 2020
59
Financial statementsGovernanceStrategic report Development
Apprenticeships
2020 objectives
• Develop new brand-specific, entry-level apprenticeships for each of the trade merchanting
businesses, applying the “Branch Counter to Boardroom” approach.
• Create a suite of apprenticeship programmes to support the growth of the Toolstation business.
2020 progress
Despite the impact of Covid-19, the Group launched 14 new
apprenticeship programmes in 2020, including brand-specific,
entry-level schemes for the Group’s trade businesses. The Group now
has 38 different apprenticeship programmes and has introduced the
“Branch Counter to Boardroom” concept to all the trade businesses.
In 2020 the Group extended the apprenticeship programmes into the
Toolstation and Wickes businesses and the Group enrolled 783
colleagues onto new apprenticeship programmes and 179 colleagues
graduated with an 93% distinction rate. In total the Group was able to
invest £2.4m into training colleagues on apprenticeship programmes
in 2020.
Following the impact of Covid-19 we transferred all apprenticeship
programmes online to ensure they could continue. We were awarded
with the Chartered Management Institute’s award for “Innovation in
delivery” for the Group’s work in this area.
What’s next?
• The Group will continue to grow its apprenticeship offering in
2021, adding an additional six new programmes to ensure that
there are appropriate programmes for all colleagues.
• The Group plans to recruit 500 new apprentices in 2021 and
develop 500 existing colleagues to enable them to progress to
a new role through our “Branch Counter to Boardroom” career
pathways.
Colleagues enrolled onto
apprenticeship programmes
783
Graduates passing with
“distinction” in 2020
93%
60
Travis Perkins plc Annual Report and Accounts 2020
Case study:
Diversity in apprenticeships
The Group has developed award-winning apprenticeship
programmes aligned to each job role in the branch network. This
has allowed the Group to recruit new colleagues from outside the
Group’s sector and train them to succeed. In 2020 39% of
successful candidates were female and 66% were under 25.
In 2021 the Group aims to recruit 500 new colleagues using the
apprenticeship programmes, allowing recruitment from outside the
sector and positively impacting the diversity mix of the workforce.
Case study:
Jessica Potter
Jessica Potter joined CCF on a management apprenticeship
programme in February 2019 from Debenhams, and therefore
had no previous experience of the construction materials industry.
The apprenticeship programme quickly provided her with the
skills, knowledge and behaviours to be a valued colleague in the
Group’s branch network and within 12 months of joining us Jess
was promoted to Assistant Branch Manager at CCF Sheffield.
Sustainability overview continued Other information
Management and leadership development
2020 objectives
• Roll out of the new Winning Leaders curriculum across Travis
Perkins merchanting businesses, with tailored versions for the
specialist merchanting businesses (BSS, CCF, Keyline and
Benchmarx), as well as support functions.
• Design and pilot phase two of the curriculum in the trade
merchanting businesses.
Talent and succession
2020 objectives
• Ensure a well-balanced representation of backgrounds,
nationalities, cultures, skills and experiences within
succession pipelines and talent pools at all levels.
• Continually improve the employee value proposition to offer
a unique, competitive and compelling colleague experience to
support the Group’s external talent attraction strategy.
2020 progress
Despite the challenges presented by Covid-19, progress has been
made against the Group’s management and leadership development
objectives:
• Early in 2020 all senior leaders in the merchanting businesses
attended a one-day Employee Relations masterclass to increase
their capability and self-sufficiency.
• Regional directors and senior leaders across Travis Perkins
General Merchant completed two days of “performance coaching”
training.
• The Group invested in an innovative “leadership resilience and
well-being” programme. The programme allows each senior
leader in the business to work with a recognised expert in this field
to complete a “Resilience Quotient Inventory” questionnaire,
receive one-to-one coaching on the results and participate in four
half-day, virtual workshops. The aim is to build self-awareness,
resilience and well-being for themselves and their teams.
• Toolstation launched a Learning and Development framework in
2020, the “Toolstation Academy”. This framework will provide
colleagues with the knowledge and skills to perform at their best
and provide them with opportunities for growth. Two Management
Development programmes were launched during 2020, focused
on developing store supervisors and store managers of the future.
2020 progress
The Group’s talent and succession practices were reviewed to ensure
the Group’s colleagues are well-placed to benefit from the Group’s
career development opportunities and to increase the focus on
inclusion. The variety of businesses in the Travis Perkins family and
the broad national coverage ensures that the Group continues to offer
market-leading career development opportunities.
The Group’s rich heritage of progression from “Branch counter to
Boardroom” encourages colleagues at all levels to build fantastic
careers. There was a focus on highlighting this unique competitive
advantage in 2020 and this will continue to be a priority.
In 2020 the succession plans for the Group’s leadership roles were
rigorously challenged and improved. The focus in 2021 is to hone
development and career plans and benchmark potential in this group
to ensure key appointments can be facilitated at the right time.
All retail senior leaders at Toolstation attended a one-day strength-
based development session in 2020. Toolstation’s new Core
Strengths and Core Capabilities programme, within the new
Toolstation Academy, focuses on colleagues playing to their strengths
and being at their best every day.
What’s next?
• Focus on the Group’s leadership culture, with pro-active
coaching for senior leaders so they can have better
performance conversations and enable their managers to do
the same.
• Support managers in recruiting people from different
backgrounds and increase the diversity of thought in the
Group’s workforce.
What’s next?
•
Invest in developing talent across the Group by setting out
clearer paths to senior leadership roles.
• Use the Group’s apprenticeship programmes to ensure all
colleagues can access outstanding career development support.
• Focus on encouraging, coaching and supporting our most
talented individuals to drive their own career development.
Travis Perkins plc Annual Report and Accounts 2020
61
Financial statementsGovernanceStrategic report Diversity and inclusion
2020 objectives
• Map the experience of current and future colleagues to identify focus areas to support the
“Workforce with a Difference” programme.
• Establish a “Women’s Network” to create an inclusive environment for all colleagues to sell the
benefits of working for Travis Perkins and to attract talent and build more diverse teams.
• Align apprenticeship programmes and local recruitment support to this agenda to enable the
business to attract and select from more diverse backgrounds.
2020 progress
The Group continues to learn about colleagues’ experiences and use
this to drive change through the Group’s expanding networks. The
Wickes LGBTQ+, BAME, Ability and Well-being networks have
continued to lead change and generate activity and energy around the
inclusion agenda. Their “Balance for Better” gender network has led to
an improved approach to family leave.
The TP Inc Women’s Network, the LGBTQ+ network, TP Proud and
the BAME and allies networks were also launched in 2020. The TP
Inc Women’s Network brings women from across the Merchant
businesses together, with the aim of building a broader network of role
models, change agents and allies focussed on equality. The network is
acting to improve the Group’s gender balance, with on-going work on
uniform, tolerance and behaviours, and flexible working.
The Group proudly announced its commitment to putting disability on
the leadership agenda with a partnership with the Valuable 500. The
Group also put forward 10 mentees and 10 mentors for the 30% club,
which gathers together nearly 2,000 mentors and mentees from
across the business community each year to support each other to
develop. The programme is focused on accelerating the development
of women into senior leadership roles.
What’s next?
• Establish a diversity and inclusion advisory board that includes
all the Group’s networks, with each area sponsored by a GLT
member. The advisory board will work with the GLT to set
targets and contribute to the GLT's agenda.
In 2021 all the Group’s businesses will create a diversity and
inclusion action plan.
•
Diversity and inclusion will be fundamental
to our future success, and we have signed
up to The Valuable 500 as part of our
commitment to changing our business for
the better and to tap into this rich network
to learn and share best practice. Around
80% of disabilities are hidden, and we want
our colleagues to feel able to bring their
whole selves to work and be confident and
open about their disabilities without being
judged or defined by that.
Nick Roberts
Chief Executive
62
Travis Perkins plc Annual Report and Accounts 2020
Sustainability overview continued Other information
Gender diversity
Director
Manager
Colleague
Total
Central Services
Retail
Toolstation
Plumbing & Heating
Merchanting
Total
Group head count
Female
2
76
7,903
7,981
Female
306
3,181
2,129
609
1,756
7,981
%
22%
22%
28%
28%
%
45%
38%
40%
19%
16%
28%
Male
7
272
20,450
20,729
Male
372
5,142
3,247
2,632
9,336
20,729
%
78%
78%
72%
72%
%
55%
62%
60%
81%
84%
72%
Total
9
348
28,353
28,710
Total
678
8,323
5,376
3,241
11,092
28,710
%
100%
100%
100%
100%
%
100%
100%
100%
100%
100%
100%
= 28,710
Age bands
Under 25
5,559
28 – 39
9,835
40 – 59
11,142
60 and over
2,174
Men
20,729
Women
7,981
Women in senior management*
Ethnicity
%
7
8
1
.
%
4
9
1
.
%
6
8
1
.
%
9
.
1
2
2017
2018
2019
2020
* Senior management is defined as Directors and managers
per the statutory reporting of gender diversity
White British
18,184
Unknown
7,545
Non British
1,729
Non-White British
1,252
Travis Perkins plc Annual Report and Accounts 2020
63
Financial statementsGovernanceStrategic report
Sustainable products and services
2020 objectives
• Continue to evolve product ranges and services to support
customers to deliver against government plans for Zero
Carbon Homes. This includes improved information on
business websites to more easily identify relevant products.
• Set up an internal working group to ensure best practice is
shared across the Group’s brands for wider implementation.
• Develop strategy and plans to optimise the solutions
provided to customers.
2020 progress
A new strategic workstream was established in 2020 to assess the
ESG needs of customers and develop value-add services. The Group
already stocks and sells sustainable products and provides ESG
services such as waste management, development training and Social
Value fund management to its larger customers. Research began in
2020 into opportunities for improvement or expansion of existing
services or the introduction of new services.
Specific initiatives during 2020 included:
- Supporting customers to engage with the Green Homes Grant,
showcasing the Group’s range of sustainable products and
providing services such as training to increase uptake;
- Engaging with a group of regional, bespoke builders to understand
how they can win with ESG, embedding sustainable products in
their developments and home buyer marketing;
- Providing tailored ESG solutions for Managed Services customers
including carbon reporting, electric vehicles and ESG advice; and
- Developing information and guidance sheets on sustainability and
energy efficiency to support a community in North Wales, in
partnership with a local housing association.
Case study:
Supporting customers to benefit from the Green
Homes Grant
The government launched the Green Homes Grant during 2020.
This scheme enables customers to receive a grant from the
government to cover up to two thirds of the costs of energy
efficiency home improvements. The improvement measures in
scope include low-carbon heating, insulation, heating controls,
energy-efficient doors and draft proofing. The Group is well
positioned to support the trade to take advantage of this scheme.
Relevant products have been highlighted on the business websites.
Installers have been offered training to help them expand their
skills. City Plumbing Supplies offers indemnified designs for
renewable heating systems through their expert in-house team.
“City Plumbing Supplies are already seeing an upturn in Energy
Efficiency product sales around the scheme. Our dedicated team
in this sector are providing support to installers in specifying
solutions to enable homeowners to apply for the government’s
Green Homes Grant vouchers.” Steve Alldritt, Technical Director,
Travis Perkins Plumbing and Heating Division.
What’s next?
• Develop a suite of ESG value-add services for customers,
supporting their needs and helping them to win through
sustainability.
• Establish supplier and customer forums to share best practices
and collaborate on solutions to the Industry’s shared
challenges.
• Develop a sustainability support package for Managed
Services customers.
Case study:
Deep-dive on ESG with regional builders
Regular forums were held with a select group of regional, bespoke
builders throughout 2020 to determine the ways in which the
Group can support their success through ESG products and
services. Access to the right sustainable products and ESG
information (on both products and suppliers) provides a number of
benefits to house builders:
- The adoption of sustainable products and modern methods of
construction can save time on the construction site and
therefore the cost of builds.
- The inclusion of information on a proposed development’s
sustainable product and supplier mix can support success in
securing finance and in land and planning applications.
- The promotion of the sustainable features of a new home to
potential buyers can secure sales.
Work began in 2020 with a number of large manufacturers and
regional builders to categorise products, collate ESG information
and develop marketing materials.
Assurance
Specific data points in the Sustainability (or “Doing the Right Thing”) section, marked with the logo ‘
verification procedures which are based on AA1000AS (2008) and ISAE 3000. A copy of their verification statement is available at https://
www.travisperkinsplc.co.uk/responsibility/environment.
’, have been assured against LRQA
64
Travis Perkins plc Annual Report and Accounts 2020
Sustainability overview continued Other information
Responsible sourcing
2020 objectives
• Assess all suppliers (whether product or service, for resale or
•
not) against the new risk assessment approach.
Improve and relaunch the Online Risk Assessment tool to
suppliers based on their risk level.
• Continue the transition to separate technical and ethical
audits for own-brand manufacturing sites.
• Develop a Timber Road Map to further increase the
percentage of timber purchases from certified sources.
2020 progress
The Group has partnered with an expert third party to support
supplier assessments, with a new online risk assessment (“ORA”)
developed and launched to over 1,000 suppliers during 2020. The
ORA covers environmental, social and quality questions.
The Group completed the move of all ethical audits of own-brand
factory sites to best-practice standards, providing more confidence in
the labour standards and ethical behaviours in the supply chain. The
audits are now Sedex Members Ethical Trade Audit (“SMETA”) ,
Business Social Compliance Initiative (“BSCI”) audits or in-house audits
aligned to SMETA.
Internal controls on timber have been strengthened, not least in
readiness for the transition from European Timber Regulations to UK
Timber Regulations. The transition will require additional due diligence
on higher risk timber coming into the UK from European countries.
A new responsible sourcing policy and group minimum standard was
launched in 2020 and will support a joined-up approach across the
Group’s businesses, sharing best practices to improve controls.
What’s next?
• Reduce risk in the supply chain and protect supply chain
workers through the improved supplier assessment and site
auditing approach.
• Launch a new online risk assessment specifically for
“goods-not-for-resale” suppliers.
• Work with manufacturing sites and branded suppliers to meet
the regulation changes triggered by Brexit.
FSC or PEFC certified timber purchased in 2020
98%
100%
75%
50%
25%
0%
PEFC
98%
23%
75%
18%
75%
26%
71%
2019
2020
2013
FSC
Case study:
New responsible sourcing expert partner
The Group is proud to have begun a new partnership with Verisio,
an expert in social auditing and supplier assessment. Verisio is
hosting the Group’s supplier online risk assessment, allowing
suppliers to easily submit information and provide updates for
corrective actions. The site auditing programme and pre-shipment
inspections are also now managed in the new system, giving a
consolidated view of supplier risk so enabling the Group to
manage risk out of the supply chain.
Case study:
Readying the business for post-Brexit timber
regulations
The transition from EU Timber Regulations to UK Timber
Regulations is being carefully managed across the Group.
Alongside the Group’s partner, Track Record Global, this is
ensuring that enhanced due diligence is conducted where the
Group is the first placer of timber onto the UK market. The Group
remains committed to only sourcing certified timber, which is an
added reassurance for customers of the sustainability of the
timber we sell.
‘
’ indicates that the data point has been assured. Please see page 64 for more information.
Travis Perkins plc Annual Report and Accounts 2020
65
Financial statementsGovernanceStrategic report Colleague voice and engagement
2020 objectives
• Ensure colleague engagement surveys are undertaken for
all businesses and functions every 12–18 months.
• Continue with the “Colleague Voice” panel to listen to
colleagues and understand how well our culture and values
are embedded, the key issues that they are facing and the
plans in place to address them.
• Continue to offer a variety of “Colleague Voice” forums and
two-way feedback opportunities, ensuring colleagues’ views
and opinions are contributing to business decisions.
2020 progress
During the Covid-19 pandemic the Group had to be agile and
make colleague engagement more accessible as an integral part of
decision-making. A weekly “Pulse” survey was introduced for all
working and furloughed colleagues to ensure their safety and
well-being could be prioritised. This feedback directly influenced
business decisions, particularly around well-being.
New Group-wide information channels were launched, including a
new intranet site and weekly newsletter. This enabled the Group to
unite colleagues in new ways and to quickly respond to their concerns.
Internal feedback suggested colleagues felt well-informed, connected,
safe and empowered to call out issues that “don’t look right”.
During 2020 the Group initiated colleague listening groups with Pete
Redfern, Senior Independent Director. Pete has been designated as
the Non-executive Director for engagement with the workforce,
pursuant to the UK Corporate Governance Code 2018 and is the
Colleague Voice Representative on the Board. Pete held Colleague
Voice Panels with colleagues across the Group, with participants
encouraged to share unfiltered thoughts, ideas and concerns. Pete
takes his observations and the common themes to the Board to
support continuous improvement and to ensure the colleague voice is
brought into the boardroom. The businesses continue to use colleague
networks and people boards to ensure there is regular, open and
robust two-way feedback.
Topics debated by Pete and colleagues on the panel in 2020 included:
– The Group’s commitment to Health and Safety and behaviour in
real world situations.
– Colleagues’ understanding and buy-in to strategy.
– The sense of connection between individual businesses and the
TP Group.
– Diversity and Inclusion in practice.
– Career opportunity and engagement.
IT development across the Group.
–
What’s next?
• Maintain the Group’s ability to “take the pulse” of colleagues and
respond to what matters to them, finding ways to give real-time
insight and bring colleague engagement data to life.
• Undertake colleague engagement surveys in the first half
of 2021.
66
Travis Perkins plc Annual Report and Accounts 2020
Travis Perkins was recognised as a Top Employer
by the Top Employers Institute, marking 11 years of
recognition for the Travis Perkins Group.
Case study:
Listening and talking to our colleagues when we
needed to most
During the Covid-19 crisis the Group ran a weekly “Check in
Tuesday” survey with over 35,000 responses submitted during
the 21 weeks of the survey. It included five simple questions which
asked colleagues how they were feeling, whether they felt
informed and what else could we do to help them.
Colleague engagement in this survey has demonstrated that their
voice is important and contributed to a sense of purpose and
pride, as expressed in the surveys and on social media:
– Just looking forward to getting back to what we do best... The
company has supported us, we want to return that support.
– So proud to work for this amazing company. It feels amazing to
know that the company put the health of staff and customers
before profit.
I’m proud to work for BSS, we are constantly working to help
the wonderful guys in the NHS.
–
– We are TP, the best... we will overcome all obstacles. Proud as
–
ever to wear the Green and Gold.
I just wanted to say thanks for reading my previous feedback
and asking my manager to sit and talk with me. It helped.
– Everyone is playing their part. Best wishes to all and stay safe.
Sustainability overview continued Other information
Human rights and modern slavery
2020 objectives
• Assess all suppliers against the new risk assessment approach.
• Launch an improved training module on modern slavery with
guidance for all employees on spotting the red flags.
• Continue to transition all own-brand factory sites to a new
ethical audit format.
• Collaborate with key customers to support their work in
preventing modern slavery
Legal compliance
2020 objectives
Implementation of a Regulatory Risk plan in order to:
•
•
•
Improve Oversight – enhancing the information available to
senior management.
Improve Assurance – identifying and closing any gaps in the
assurance framework.
Improve Understanding – simplifying guidance and refreshing
training to further embed the management of regulatory risk
in the business.
2020 progress
All suppliers were assessed using the Group’s new risk assessment
approach and a new online risk assessment was launched for
suppliers of products for resale. Due diligence is being completed
with all suppliers identified as “higher risk”. The due diligence
processes for labour agencies used by the Group’s distribution
centres were also enhanced.
2020 progress
A regulatory risk plan has been developed and implementation has
started. The first step has been the introduction of a new Group-wide
Code of Conduct, developed with the business and ratified by the
Board, with an accompanying marketing campaign to promote
awareness. This provides a fresh, single point-of-call, for legal
compliance policies and for key policies in other areas.
In conjunction with this, a number of the underlying legal compliance
policies have been refreshed to go into more depth and provide
greater guidance, supporting the easily understood, high-level
overview of the Group’s legal compliance policies given by the new
Code of Conduct. A new minimum standards framework is being
rolled-out across the Group that will also help provide assurance
across legal compliance areas and will improve the GLT's oversight.
This journey is continuing with the engagement of a new training
partner to make the Group’s compliance training more engaging.
What’s next?
• Embed recently launched new Code of Conduct within
the business.
• Continued roll-out of the minimum standards framework and
development of business-specific action plans to close gaps.
• Continued roll-out and monitoring of updated legal compliance
training across:
– Anti-Bribery and corruption
– Insider trading
– Competition law
– Money laundering
– Conflicts of interest
– Corporate criminal offences
A new modern slavery training module for all employees was
launched in December 2020, as well as a specialist training module
for the most affected roles in the HR, Commercial and Freight teams.
The new Code of Conduct issued to all employees in November
2020 includes a section on modern slavery, listing the red flags for
colleagues to watch for.
Best practices were shared with selected customers and suppliers to
support their own anti-slavery controls and to learn from their
approaches. Industry collaboration is crucial in tackling this issue.
The Group launched a new modern slavery policy and Group
minimum standard during the year. This will support a joined-up
approach across the Group’s businesses, sharing best practices to
improve controls.
What’s next?
• Continue to roll out due diligence controls for suppliers identified
as more exposed to the risk of slavery and improve the
understanding of slavery risks across the supplier base.
• Monitor completion of the two new modern slavery
training modules.
• Promote the “Speak Up” line to help colleagues raise concerns
about modern slavery and share this line with suppliers so that
workers in our supply chain can raise concerns.
Case study: Shining a light on labour agencies
There are greater risks of slavery when workers are not directly
employed. Contractual and physical due diligence processes with
labour agencies supporting the Group’s distribution centres have
been strengthened and a sign-off sheet is now required for each
new agency worker.
The Group now requires agency workers physically bring their
right-to-work documentation on their first day. This ensures the
workers are as expected and protects against gang control, a key
feature of which is confiscation of the victims’ identity documents.
Travis Perkins plc Annual Report and Accounts 2020
67
Financial statementsGovernanceStrategic report Waste
2020 objectives
• Set new targets for waste reduction and develop a roadmap.
• Review customer waste solutions to ensure that customer
expectations are continually met.
• Engage with relevant forums and industry partners to share
best practices and to learn and develop shared solutions as
the industry moves towards a more circular economy.
• Engage with suppliers to reduce the amount of unnecessary
packaging entering the Group’s supply chain, in particular
single-use plastics
2020 progress
The Group set itself a new waste target: eliminate all unnecessary
single-use packaging by 2025. In addition, efforts to divert 100% of
waste from landfill continued.
Eliminating all unnecessary single-use packaging by 2025 is a
challenging target and the Group is working with key supply chain
partners to achieve it. Plans are being developed to meet the
requirement of 30% recycled content in plastic packaging by April 2022.
Amidst the challenging conditions of 2020, the Group maintained its
backhaul recycling operations to help branches recycle materials and
divert waste from landfill. The Group backhauled 5,100 tonnes of
cardboard, 1,100 tonnes of plastic and 12,200 tonnes of timber,
representing 52% of total waste for 2020.
Tonnes of waste per £m of yard and core sales
d
e
k
r
o
w
s
r
u
o
h
n
o
i
l
l
i
m
r
e
p
s
I
T
L
12
10
8
6
4
2
0
8.3
6.7
6.1
1.5
0.5
0.4
2013
2019
2020
Diverted from landfill
Landfill
Waste diverted
from landfill
94%
Case study:
Engagement and reducing packaging
At the start of the year a new Waste & Resources Working Group
was formed to bring together subject matter experts from across
the Group. This working group has developed a new Waste
Policy setting out the Group’s expectations and aspirations, as
well as producing a series of Packaging Advice Sheets to advise
on alternative, innovative packaging solutions and help reduce
single-use plastic.
Waste reduction and recycling remains a key action
area for the business. We recognise the importance
of a circular economy and we’re excited to be
developing our plans to ensure our business offers
products that can be repaired, reused or recycled by
the end user.
Lucy Perkins
Group Materials and Waste Manager
Case study:
Removal of plastic packaging
Packaging is a key business risk. To mitigate this, the Group has
implemented a packaging-reduction strategy that will reduce the
use of unnecessary packaging and eliminate avoidable single-use
plastic. Throughout 2020 the Group’s businesses have engaged
with key suppliers to target products for packaging reviews.
Toolstation is working with suppliers to eliminate black plastic,
polystyrene and avoidable single-use plastic by 2021. Many other
suppliers across the Group have confirmed that they are removing
plastic from their packaging. The commercial team in Shanghai has
identified over 2,000 products that will be targeted for a plastic
saving of up to 91 tonnes. The P&H businesses have removed 100
tonnes of polystyrene and 14 tonnes of plastic bags whilst
Benchmarx has removed over 40 tonnes of styrofoam plastic.
Internal packaging has also been looked at. Travis Perkins and
Wickes reviewed their transit packaging to remove unnecessary
shrink wrap and are working with packaging suppliers to replace
single-use plastic with sustainable materials. In anticipation of the
2022 plastic tax, the Group is demanding at least 30% recycled
content in plastic packaging across many areas of the business.
CCF is leading the way with a 30%-recycled-plastic pallet hood.
What’s next?
• Launch of a Waste & Circular Economy action plan.
• Work closely with suppliers to embed circular economy
concepts into their products and explore reuse opportunities
from surplus building products with reuse organisations.
• Ensure suppliers include at least 30% recycled content
in packaging.
• Continue to work towards the target of diverting 100% of waste
from landfill.
• Expand the Group’s backhaul recycling operation to enable
“WEEE” recycling from branches and trial customer take-
backs for bulk bags and other products.
Environment incidents
In 2020 the Group recorded 25 environmental incidents with ten classed as “reportable” and 15 “non-reportable”. Of the 25, eight were a result of
“third party” sources (such as spillages from supplier or customer vehicles). Most incidents related to spillages such as hydraulic oil or paint.
‘
’ indicates that the data point has been assured. Please see page 64 for more information.
68
Travis Perkins plc Annual Report and Accounts 2020
0.125
0.100
0.075
0.050
0.025
d
e
k
r
o
w
s
r
u
o
h
d
n
a
s
u
o
h
t
r
e
p
s
y
a
d
k
r
o
w
t
s
o
L
0.11
0.08
0.07
7.21
5.52
5.63
0.000
2018
2019
2020
2018
2019
2020
d
e
k
r
o
w
s
r
u
o
h
n
o
i
l
l
i
m
r
e
p
s
I
T
L
8.0
6.0
4.0
2.0
0.0
Sustainability overview continued
Other information
Reward and benefits
2020 objectives
•
Increase the focus on colleague physical, emotional
and financial well-being.
• Continue to improve and introduce benefits through
Contributing to charities and communities
2020 objectives
• Review the Group’s approach to Social Value propositions
and delivery to differentiate customer support and to improve
positive impacts on society.
MyPerks, the Group’s colleague benefits hub.
• Extend existing charity partnerships with Macmillan and
Teenage Cancer Trust.
• Continue with product donations and outreach programmes.
• Review the Group’s approach to community and charity
partnerships to optimise the value generated, align them with
the business and best engage colleagues.
2020 progress
In the unique circumstances of 2020, the substantial fundraising
efforts normally undertaken by individuals and teams to support local
charitable projects were replaced by a momentous effort to support
front-line workers with volunteering, materials, equipment and PPE.
This engagement empowered local colleagues to get involved with
our local communities at a level never seen before. It also encouraged
collaboration across our brands and functions, helped us strengthen
local relationships both internally and externally, and gave our
colleagues a renewed sense of purpose during what was a difficult
time for our nation.
All of the Group’s businesses have long-term charity partnerships. In
2020 Toolstation entered into a new two-year new partnership with
Macmillan Cancer Support and Wickes joined forces with the charity
YoungMinds.
In 2020, the Group began to develop a more integrated framework
for our community and charitable engagement across the Group. This
work is ongoing and will improve consistency around the guiding
principles, ensuring we use the Group’s efforts as a constructive
platform for the development of new internal and external networks.
The Group prides itself on its commitment to learning and
development and has found a great match in the charity Volunteer It
Yourself (“VIY”). VIY combines DIY and volunteering by challenging
young people to help repair and refurbish youth and community
facilities whilst learning vocational trade skills on the job. They are
mentored by local trade professionals and can work towards trade
skills accreditations. This year 19 Travis Perkins branches have
supported VIY projects with materials and with colleagues
volunteering to act as mentors. The Group has supported nearly 300
young people so far; a majority of whom are unemployed or
disengaged from mainstream education.
• Ensure bonus programmes deliver strategic benefit
for the Group and allow colleagues to share in the
Group’s success.
2020 progress
• Colleagues were supported through the challenges of Covid-19 in
a number of ways. A number of well-being initiatives were
escalated and enhanced through the Group’s well-being hub. This
included an employee assistance programme, fitness videos,
mindfulness sessions, free flu jabs and healthy eating guidance
and recipes. Financial support was provided to colleagues required
to work from home and, although bonuses were not possible in
2020, a thank you payment was made in December to colleagues
below management levels. This recognised their extraordinary
contribution and efforts during the year.
• Funds which ordinarily would have been applied to salary reviews
were diverted towards lower-paid colleagues. This allowed around
four thousand colleagues’ salary levels to be raised to the Living
Wage Foundation’s “Real Living Wage”. All colleagues within the
Merchant businesses are now paid at Real Living Wage levels.
• Simplified and refocused incentives and bonuses were designed
and developed and will be deployed to colleagues in 2021.
• Family Friendly policies were reviewed in 2020, significantly
enhancing parental leave provisions including maternity, paternity,
adoption, surrogacy and IVF treatment.
• As part of the financial well-being programme, colleagues were
encouraged to engage with their savings and retirement provision.
This included colleague participation in the national campaigns of
Pensions Awareness Day and Talk Money Week and a pro-active
campaign to encourage the habit of investing in savings. Pension
webinars covering a range of topics, including considerations for
over 55s, female colleagues, and for all colleagues in relation to
market volatility caused by Covid-19, were viewed by over 3,000
colleagues.
Reward awards
The Group was proud to receive the following accolades at the
Employee Benefits Awards in October 2020:
Benefits Team of the Year, which recognised team collaboration and
innovation in the delivery of colleague benefits
Best Benefits Communication by a Large Employer, which
recognised the Group’s use of technology to ensure that colleagues
only receive information about personally relevant benefits
What’s next?
• Full deployment of the simplified and re-focussed incentive and
bonus approach.
• Simplification and realignment of all colleague bonuses.
• Continued focus on colleague well-being, particularly financial
well-being, with a review of the employee pension provision and
levels of colleague engagement.
Travis Perkins plc Annual Report and Accounts 2020
69
Financial statementsGovernanceStrategic report Thank you for your very generous donation.
This is absolutely amazing and will make an
incredible difference at what I’m sure you can
imagine has been a rather challenging time for the
young people that we support with wheelchairs
and mobility equipment.
Jennie Chmura
Senior Corporate Account Executive,
Whizz-Kidz
Case study:
The best 50p ask ever!
Each year colleagues at Wickes vote on a charity. This year they
voted for YoungMinds because mental health issues have
increased during the pandemic. It’s estimated that three children
in each school class now have a mental health problem and
YoungMinds are able to put them in touch with the right services to
get help. To mark World Mental Health Day on 10 October 2020,
all Wickes stores did a 50p ask which raised nearly £70k – a
phenomenal result. “The Covid-19 pandemic has impacted young
people across the country and we know that more are struggling
with their mental health as a result. These events raise awareness
of young people’s mental health and vital funds for YoungMinds so
that we can continue fighting to make sure all young people get
support for their mental health as soon as they need it,” said
Director of Development at YoungMinds,
Vanessa Longley.
Case study:
Supporting the front line
During the pandemic colleagues across the Group have supported
front-line staff in the fight against Covid-19. Across the UK
Toolstation, Travis Perkins and Wickes worked together to deliver
more than 200,000 masks, visors, gloves and safety goggles to
hospitals, GPs, nursing homes, and Fire and Rescue Services. Wickes
also threw in boxes of Mars bars to help keep energy levels up!
The Plumbing & Heating and specialist Merchant businesses
donated construction material including respirators, vanity units,
plumbing and electrical items and boards. They helped get the
water and heating on at the Nightingale Hospitals and supported
the swift refurbishment of Great Ormond Street Hospital.
Well done Travis Perkins for donating PPE
equipment!
Dara Ó Briain
Comedian
What’s next?
• The Group will complete and implement a new framework for
community and charitable engagement work that will include
more cross-brand and multi-discipline projects.
• The Group will expand its support for VIY. Nearly 20 branches
have pledged support for some of the 150 VIY projects that are
in the pipeline for next year.
Charity
Business area
Events
Alzheimer Society - £10,000
CCF
Silent auction and colleague walking and cycling challenges
Macmillan Cancer Support - £240,000
Travis Perkins, Benchmarx &
Toolstation
Sponsored facemasks, conference dinner, charity auction, London
Marathon in Robbie’s garden, carrier bag sales, guess no. of
catalogue products, store team cycle event, Go Green for Halloween
Mind - £5,750
BSS
Conference, virtual quiz, Super 6 League
Teenage Cancer Trust - £45,000
Plumbing & Heating
Collections, Comb Together
Prostate Cancer UK - £10, 000
Keyline
Whizz-Kidz - £52,000
Young Minds - £365,000
Transport
Wickes
Virtual quiz nights, skydive, Walk the Month, Run the Month, counter
collections
Driver of the Year fundraising and truck sponsorship
50p asks, “Wicksmas” fundraising event, Christmas jumper day, web
donate button
70
Travis Perkins plc Annual Report and Accounts 2020
Section 172 statement
Other information
Engaging with stakeholders
Building positive relationships through strong engagement,
collaboration and dialogue with stakeholders that share our values is
important to us, and working together towards shared goals assists us
in delivering long-term sustainable success.
Our Group comprises a number of business units, all of which have
extensive engagement with their own unique stakeholders as well as
other businesses in the Group. The governance framework delegates
authority for local decision-making at business unit level up to defined
levels of cost and impact, which allows the individual businesses to take
account of the needs of their own stakeholders in their decision-making.
The leadership teams of each business make decisions with a long-term
view in mind and with the highest standards of conduct in line with
Group policies. In order to fulfil their duties, the Directors of each
business and the Group itself take care to have regard to the likely
consequences on all stakeholders of the decisions and actions which
they take. Where possible, decisions are carefully discussed with affected
groups and are therefore fully understood and supported when taken.
The Board is well informed about the views of stakeholders. Reports
are regularly made to the Board by the business units about the
strategy, performance and key decisions taken which provides the
Board with assurance that proper consideration is given to stakeholder
interests in decision-making and it uses this information to assess the
impact of decisions on each stakeholder group as part of its own
decision-making process. In response to the Covid-19 pandemic, the
cadence of reporting on stakeholder views to the Board was
accelerated during 2020 enabling the Board to react quickly and
develop the right strategies. Details of the Group’s key stakeholders
and how we engage with them are set out below.
Shareholders
As owners of our Group we rely on the support of shareholders and
their opinions are important to us. We want to enable them to have an
in-depth understanding of our strategy and our operational and financial
performance, so they can accurately assess the value of our shares.
We have an open dialogue with our shareholders through one-to-one
meetings, group meetings, webcasts and the Annual General Meeting.
Discussions with shareholders cover a wide range of topics including
financial performance, strategy, outlook, governance and ethical
practices. Shareholder feedback along with details of movements in
our shareholder base are regularly reported to and discussed by the
Board and their views are considered as part of decision-making.
Due to Covid-19 restrictions we regrettably had to hold a closed
Annual General Meeting at our head office in Northampton. A live
audio stream of the meeting and a facility for shareholders to submit
questions was provided. Further details of how we conducted our
AGM can be found in the governance section on page 79.
Colleagues
Our people are key to our success and we want them to be successful
individually and as a team. We aim to build a trusting, respectful and
inclusive environment where everyone feels safe, welcome, valued for
their contribution and able to perform at their best.
We work hard to engage with and listen to our colleagues in a number
of different ways including engagement surveys, forums, listening
groups, briefings, internal communities, newsletters and through our
anonymous “Speak Up” hotline. Key areas of focus include safety,
health and well-being, diversity and inclusion, development
opportunities and pay and benefits. In his role as the Colleague Voice
Representative, Pete Redfern regularly reports what is important to
our colleagues to the Board and ensures consideration is given to
colleague needs. Further information on the ways in which the Group
engages with colleagues can be found in the people section on pages
66 to 67.
In response to the Covid-19 pandemic, new Group-wide information
channels were launched with all colleagues receiving regular updates.
A weekly “pulse” survey was introduced for all working and furloughed
colleagues to help better understand how colleagues were feeling,
enabling us to react quickly and develop the right support strategies.
During 2020 we completed 21 weekly surveys, with 35,000
responses from colleagues. Weekly response rates varied from 5% -
28% of colleagues, with over 50% of the responses being from
furloughed colleagues in the first four weeks of the survey.
Customers
Working for our customers is one of our cornerstones and it drives us
to nurture mutually beneficial relationships that deliver joint value. Our
ambition is to deliver best-in-class, tailored service to customers.
We build strong lasting relationships with our trade customers and
spend considerable time with them to understand their needs and
views and listen to how we can improve our offer and service for
them. We use this knowledge to inform our decision-making, for
example to tailor our proposition to suit customer demands, with fixed
range/fixed price models for small trade customers, and more flexible
access to a wider product range with volume-related discounting in
the Merchant businesses. Our most significant customers are
monitored closely as they are imperative to our continued success.
During the year, credit management was a particular focus to ensure
our customers are supported and enabled.
Suppliers
Our suppliers are experts in the wide range of products we source
from them. We aim to build strong relationships with our suppliers to
develop mutually beneficial and lasting partnerships.
Engagement with suppliers is primarily through a series of interactions
and formal reviews and we also host regular conferences to bring
suppliers and customers together to discuss shared goals and build
relationships. Key areas of focus include innovation, product
development, health and safety and sustainability. The Board
recognises that relationships with suppliers are important to the
Group’s long-term success and is briefed on supplier feedback and
issues on a regular basis. We have maintained regular contact with our
suppliers safely throughout the Covid-19 pandemic.
Communities and the environment
Investing in sustainable growth means supporting and empowering
the communities in which we operate. By ensuring we make a positive
contribution, we can help build thriving communities and strengthen
our business.
Travis Perkins plc Annual Report and Accounts 2020
71
Financial statementsGovernanceStrategic report Section 172 statement continued
We engage with the communities in which we operate to build trust
and understand the local issues. Key areas of focus include how we
can support local causes and issues, create opportunities to recruit
and develop local people and help to look after the environment. We
partner with local charities and organisations at a site level to raise
awareness and funds. The key issues and themes across local
communities are reported back to the Board.
The Group’s impact on the environment is a key focus for the Board.
During 2020 carbon targets were established to support the Group’s
leading ambitions on ESG matters. Further information on the
sustainability overview on pages 52 to 70.
Government and regulators
The regulatory environment significantly impacts the success of our
business. We believe it is important that those who can influence policy,
law and regulation understand our views. We also want to share
information and perspectives on areas that impact our businesses.
We engage with the government and regulators through a range
of industry consultations, forums, meetings and conferences to
communicate our views to policy makers relevant to our business.
Key areas of focus are compliance with laws and regulations, health
and safety and product safety. The Board is updated on legal and
regulatory developments and takes these into account when
considering future actions.
Decision-making in practice
One of the major decisions made by the Group this year was to restructure the branch network and above-branch support functions to reflect market
fluctuations and new ways of working as a result of the Covid-19 pandemic. In making this decision the Board considered the interests of and the
impact on all stakeholders. To provide insight into the approach taken by the Board, a summary of stakeholder views and conclusions is set out below.
Stakeholder
Stakeholder views
Conclusions
Shareholders Our shareholders want us to operate in the most
cost effective way, preserve cash and maximise
returns thereby creating value and ensuring the
long term sustainable success of the Group.
Reviewing and closing branches that would be loss making or
non-strategic meant that significant cost savings could be realised and
net profit returns managed, thereby ensuring the long term sustainable
success of the Group.
Colleagues
Our colleagues want to be kept informed of
changes to the business and to be listened to
in relation to changes which will affect them
and their teams.
Customers
Our customers want propositions that work for
them and continued service to support their
business.
We care about our colleagues and were mindful of the impact that a
restructuring and branch closure programme would have on
colleagues across the business, particularly those directly impacted.
A thorough and thoughtful communication plan was implemented
including a rigorous consultation period with affected colleagues.
We tried to minimise the impact of the restructure. For example, we
carried out extensive searches to find new roles for those at risk of
redundancy, and we were able to retain 1,450 (45%) colleagues in the
business.
We maintain regular communication with customers. We provided
detailed explanations of any branch closures and, where possible,
minimised the impact by moving ownership of the affected accounts
to the nearest branch. Retained sales were tracked to ensure the
relationship was maintained.
Customers were serviced for their Essential Services projects e.g.
Nightingale hospitals
Suppliers
Our suppliers want to understand the impact of
the branch closures on their relationships and
contractual arrangements. They also want to
have confidence that the business will continue
to trade with them in the long term.
The business maintained frequent dialogue with core suppliers, who
have also been significantly impacted by Covid-19. A communication
plan was carried out across key suppliers to assure them of the
credibility of the restructuring plan, leaving the business in a strong
trading position throughout the economic recovery.
Communities Our communities want our continued support
with local causes and issues.
As an essential service, we have remained open in the majority of
locations, supplying materials in a safe way and helping to keep the
nation warm, dry and secure.
The move to close branches, and to work in a distanced way has
impacted our ability to directly interact with the communities and
charities which we support. We continue to raise funds and support
charities and communities in a safe and secure way.
The restructuring and branch closure programme will maximise the
long-term success of the Group which is in the public interest. The
Group was compliant with the relevant regulations and legislation
throughout the restructuring and branch closure process.
Government
and
regulators
The government and regulators want us to
operate in an ethical way and comply with laws
and regulations.
72
Travis Perkins plc Annual Report and Accounts 2020
Non-financial information statement
Other information
The information below is intended to help users of these accounts understand our position on key non-financial matters and has been prepared in
response to the reporting requirements contained in section 414C(7), 414CA and 414CB of the Companies Act 2006.
Reporting requirements
Principal risks
Policy embedding, outcomes and key performance indicators
Colleagues
Health, safety and
well-being
Talent management
Business model
KPIs – Accident frequency rate
Safety and well-being
Apprenticeships
Management and leadership development
Talent and succession
Diversity and inclusion
Colleague voice and engagement
Reward and benefits
Chairman’s introduction - Engaging with stakeholders and the workforce
Directors’ remuneration report
Directors’ Report – Employees
Environment
ESG
Human rights,
anti-bribery and
anti-corruption
Legal compliance
Supplier risks
Business model
KPIs – Carbon intensity
Sustainability overview
Carbon
Waste
Sustainable products and services
Human rights and modern slavery
Legal compliance
Chairman’s introduction – Culture
Directors’ Report – Modern slavery
Social and
community
People
Business model
Contributing to charities and communities
Responsible sourcing
Link
Page 16
Page 27
Page 56
Page 60
Page 61
Page 61
Page 62
Page 66
Page 69
Page 79
Page 93
Page 118
Page 16
Page 27
Page 52
Page 58
Page 68
Page 64
Page 67
Page 67
Page 79
Page 118
Page 16
Page 69
Page 65
A description of the Group’s business model and how it creates sustainable value can be found on pages 16 to 17.
Most of the reporting on these topics and KPIs is contained in the Strategic Report under the sections Business Model, Sustainability Overview and
Statement of Principal Risks and Uncertainties or are incorporated into the Strategic Report by reference from the pages noted. The Group has
appropriate policies and diligence procedures regarding all the non-financial information presented in this Annual Report.
Strategic Report approval
The Strategic Report on pages 3 to 73 was approved by the Board
of Directors and signed on its behalf by:
Nick Roberts
Chief Executive
1 March 2021
Alan Williams
Chief Financial Officer
1 March 2021
Travis Perkins plc Annual Report and Accounts 2020
73
Financial statementsGovernanceStrategic report
74
Travis Perkins plc Annual Report and Accounts 2020
Corporate governance report
Other information
Governance
76 Board of Directors
78 Chairman’s introduction
79 Corporate governance report
84 Nominations Committee report
87 Audit Committee report
93 Directors’ Remuneration report
97 Remuneration Policy report
105 Annual Remuneration report
117 Directors’ report
119 Statement of Directors’ Responsibilities
Travis Perkins plc Annual Report and Accounts 2020
75
Financial statementsGovernanceStrategic report Board of Directors
Stuart Chambers
Chairman
Nationality
British
Appointment date
1 September 2017 (Non-executive Director)
7 November 2017 (Chairman)
Nick Roberts
Chief Executive Officer
Nationality
British
Appointment date
1 July 2019
Alan Williams
Chief Financial Officer
Nationality
British
Appointment date
3 January 2017
Committee membership:
N R S
Committee membership:
S
Committee membership: N/A
Skills and experience
Stuart has extensive global executive
management and boardroom experience across
industrial, logistical and consumer sectors. He 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. Stuart’s executive career
included ten years with Shell and ten 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.
Skills and experience
Nick joined Travis Perkins from design, engineering
and project management consultancy Atkins,
where he was President. He has over 25 years of
international consulting experience and is a
passionate advocate for diversity and inclusion.
A geologist by profession, Nick holds an MSc in
Environmental Impact Assessment from
Aberystwyth University and a BSc in Geology
from the University of Reading. He is a Chartered
Geologist, Fellow of the Geological Society and
Honorary Fellow of the Institution of Civil
Engineers. He is a Deputy Chair and Director of
the Forces in Mind Trust in the UK.
Skills and experience
Alan is a qualified Accountant and Treasurer
and in addition to having a strong finance
background, he has extensive experience in
leading strategic initiatives, mergers and
acquisitions, integration and business
transformation. Prior to joining the Group, Alan
served as CFO at Greencore Group plc for six
years. Alan also previously worked at Cadbury
plc in a variety of financial roles in the UK,
France and the USA.
Pete Redfern
Senior Independent
Non-executive Director
Nationality
British
Appointment date
1 November 2014 (Non-executive Director)
28 April 2020 (Senior Independent
Non-executive Director)
Committee membership:
N R S A
Skills and experience
Pete has extensive financial, operational and
management experience as well as strong
construction and property expertise. 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 Chairman of
the Youth Adventure Trust and was a Trustee of
the homelessness charity Crisis until 2019.
Committee membership key:
A
N
R
S
Audit
Nominations
Remuneration
Stay Safe
Chairman
76
Travis Perkins plc Annual Report and Accounts 2020
Other information
Christopher Rogers
Non-executive Director
Nationality
British
Appointment date
1 September 2013
Coline McConville
Non-executive Director
Nationality
Australian
Appointment date
1 February 2015
John Rogers
Non-executive Director
Nationality
British
Appointment date
1 November 2014
Committee membership:
RN
Committee membership:
A N R
Committee membership:
A N
Skills and experience
Christopher has extensive financial, operational
and retail experience and expertise in corporate
governance and strategic planning. Chris is
currently a Non-executive Director of Vivo plc,
Kerry Group and Sanderson Design Group plc.
He is also a visiting fellow at Durham University.
Prior to this, Chris was a Director of Whitbread
plc from 2005 to 2016 where he served as
Group Finance Director from 2005 to 2012 and
Managing Director of Costa Coffee from 2012
to 2016.
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 Kingfisher plc.
Skills and experience
Coline has a wealth of international experience
with a background in management, marketing
and media as well as extensive remuneration
and boardroom experience. Coline is currently
a Non-executive Director of TUI AG, Fevertree
Drinks plc and 3i Group plc and was formerly
a Non-executive Director of Inchcape plc, 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.
Skills and experience
John has extensive finance, strategy, digital
online, property and retail experience. John has
recently been appointed as Chief Financial
Officer of WPP Plc and until October 2019 was
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.
Blair Illingworth
Non-executive Director
Nationality
British
Appointment date
1 November 2019
Marianne Culver
Non-executive Director
Nationality
British
Appointment date
1 November 2019
Committee membership:
N S
Committee membership:
RN
Skills and experience
Blair has extensive executive and board
experience in the building products sector having
been a Director of Marshalls plc, Chief Executive
of Polypipe plc, and Chief Executive of Tarmac
Building Products. His varied career includes
military service as a commissioned officer in the
Royal Marines and roles at the most senior level
in public and private companies. He is Chief
Executive and a Director of Stirling Industries plc.
Skills and experience
Marianne has extensive executive and board
experience in the global distribution and logistics
sectors. She has served as Chief, Global Supply
Chain with Premier Farnell plc and as Chief
Executive (UK & Ireland) of TNT. Marianne was
latterly Global President of RS Components, the
components trading and distribution division of
Electrocomponents plc. Marianne’s Non-
executive Directorship career to date has
included membership of the Boards of Rexel SA
(listed on Euronext Paris), The British Quality
Foundation and EDS Corporation.
Travis Perkins plc Annual Report and Accounts 2020
77
Financial statementsGovernanceStrategic report Stuart Chambers
Chairman
1 March 2021
We announced a number of changes to the
Board in 2020. In March, we said goodbye to
Ruth Anderson who stepped down from the
Board after nearly nine years of service. Ruth’s
contribution, particularly as Chairman of the
Audit Committee for seven of those years,
has been invaluable to the Group. John
Rogers took over stewardship of the Audit
Committee. Pete Redfern, Marianne Culver
and Blair Illingworth were appointed
members of the Audit Committee,
Remuneration Committee and Stay Safe
Committee respectively. They bring a wealth
of experience and expertise to their respective
roles and their contributions will prove
beneficial at this time of significant challenge.
In April 2020 Chris Rogers stood down as
Senior Independent Director (“SID”) and was
succeeded by Pete Redfern.
Finally, in January 2021 we announced the
appointment of Jasmine Whitbread as my
successor. More detail of the process
undertaken for the search which resulted in
Jasmine’s appointment is contained in the
Nominations Committee Report at pages
84 to 86.
UK Corporate Governance Code
Throughout the year ended 31 December
2020, the Company was in full compliance
with the principles and provisions of the UK
Corporate Governance Code 2018 issued by
the Financial Reporting Council which is
available at www.frc.org.uk.
Chairman’s introduction
I am pleased, on behalf of the Board, to
present the corporate governance report
for the year ended 31 December 2020.
The foundation of any resilient business is a robust corporate
governance framework underpinned by a clear strategy, strong values
and culture. The role of the Board is to provide effective leadership
which promotes the long-term sustainable success of the Group,
generating value for shareholders and contributing to the
communities in which we operate.
Over the past year the Board prioritised adjusting the Group’s
businesses in order to successfully navigate the period of uncertainty
caused by Covid-19. In March the Board took the prudent decision to
suspend dividend payments and pause the Wickes demerger process
so that we could focus on managing the Group through the challenges
presented by the pandemic.
Although the Covid-19 pandemic has been unprecedented in scale
and impact, we continue to focus on the delivery of our strategy. We
are confident in the Group’s ability to navigate near-term uncertainty
and in our position for the long-term.
We are clear that the progression of the Group’s strategy, underpinned
by robust and efficient governance structures, will deliver sustainable
long-term value for shareholders and other stakeholders, whatever
the external environment. We remain firmly of the view that good
corporate governance will contribute to a sustainable business over
the long-term.
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Travis Perkins plc Annual Report and Accounts 2020
Corporate governance report
Other information
other attendees was our paramount
consideration, so we followed the best
practice advice available at the time as well
as the applicable lockdown regulations and
regrettably had to hold a closed meeting at
our head office in Northampton. We did
provide the facility for shareholders to submit
questions in advance of the meeting and
provided a live audio stream of the meeting.
We accept that the arrangements we had to
adopt in 2020 in a short timescale in
response to an emergency situation affecting
the whole country were not ideal. We have
closely followed developments in the debate
concerning virtual meetings and we note that
it remains the case that the legal validity of
virtual meetings remains questionable,
absent a change to the Companies Act. We
have also followed closely the evolution of
facilities for hybrid meetings and the review
of practice adopted in 2020 by listed
companies so we can improve our 2021
AGM should the pandemic be continuing at
the time we hold it. We are planning
prudently, on the assumption that restrictions
will remain in force at the end of April when
we come to hold our AGM this year.
Accordingly, we intend to hold a hybrid
meeting using real-time voting and enabling
questions to be asked and answered in
real-time. On the assumption that it will not
be safe for shareholders to attend the
physical place of the AGM, we are planning
to enable virtual attendance using webcasting
technology. This will enable maximum
participation in a meeting which feels as
close to a normal meeting as possible while
safeguarding the safety and well-being of all
involved. There was strong support from
shareholders for the resolutions put to the
meeting in 2020 with an average of 94.26%
of votes in favour. Should a resolution at an
AGM receive 20% or more of votes cast
against the Board’s recommendation, the
Board would consult with shareholders to
understand the reasons behind their voting.
Leadership
Role of the Board
The Board is responsible for promoting the
long-term sustainable success of the
Company, generating value for shareholders
and contributing to wider society. It sets the
overall Group Strategy, the tone and approach
to corporate governance and considers the
opportunities and risks to the future success
of the business. The principal risks of the
business are set out in more detail on pages
44 to 51. The Board discusses strategic
matters at every meeting and has an annual
strategic off-site day to consider the Group’s
strategic direction as a whole and the
opportunities and risks faced by the Group.
The Group’s Strategy and Business Model are
set out on pages 16 to 25. The 2020 strategic
off-site day was held via video conference due
to Covid-19 restrictions.
The Board has a schedule of matters
reserved to it which is reviewed annually. No
changes were made in 2020. The schedule
of matters reserved to the Board can be
found on the Group’s website at www.
travisperkinsplc.co.uk.
In line with the Corporate Governance Code,
the Board has a number of Committees
through which it delegates certain
responsibilities. There are four Committees:
Audit, Nominations, Remuneration and Stay
Safe. All Committees operate within defined
terms of reference and these can be found
on the Group’s corporate website. The
minutes of all Committee meetings are made
available to all Directors and the Chairs of the
Committees report on the proceedings of the
Committee meetings at each subsequent
Board meeting.
Culture
The Board strongly believes that it should, in
addition to operating effectively, focus on the
culture in our businesses. The Group’s culture
is built upon five cornerstones which provide
strong values and foundations for
development in all activities. Further
information on the cornerstones can be
found on page 55.
The Board recognises the important role that
it plays in assessing and monitoring the
Group’s culture, so as to ensure that policy,
practices and behaviour throughout the
Group are aligned with its purpose, strategy
and values. The Board receives regular
updates on cultural indicators to assist its
understanding and oversight of the culture.
These include the Colleague Voice Panel, the
colleague engagement survey (“You Talk We
Listen”), and a number of listening groups
and colleague communities.
Engaging with stakeholders and the workforce
The Board takes into account the views of
its stakeholders when making decisions,
liaising with various stakeholder groups
throughout the year and particularly when
strategic decisions are to be taken.
Stakeholder groups such as shareholders,
customers, suppliers and colleagues were
all engaged with when formulating the
strategic direction of the Group, not only to
communicate the future plans, but to gain
feedback to inform the implementation and
realisation of those plans.
A statement on the ways in which the Group
meets its duties under Section 172 of the
Companies Act 2006 is described in the
Strategic Report on pages 71 and 72.
Pete Redfern is the Colleague Voice
Representative on the Board. Details of his
activities in this capacity intended to help
bring the employee voice into the Boardroom
can be found in the Colleague voice and
Engagement section of the Sustainability
overview in the Strategic report on page 66.
Annual General Meeting
Shareholders receive more than 20 working
days’ notice of the Annual General Meeting
(“AGM”) at which, ordinarily, all Directors are
present and available for questions. Each
substantive issue considered at the AGM is
the subject of a separate resolution and in
accordance with best practice, voting is
conducted by way of a poll rather than a
show of hands. The numbers of proxy votes,
lodged in advance of the meeting, for and
against each resolution are announced at the
meeting and the final votes are subsequently
published on the Company’s website.
In 2020, Covid-19 restrictions significantly
impacted the way we had to conduct our
AGM. The UK wide lockdown was imposed in
March 2020 about a month before we had
been planning to hold our AGM. At the time
of lockdown we had no idea how long it
would last and no changes had been made to
applicable company law allowing any
extension to the deadline by which we had to
hold our AGM. We took the view, therefore,
that we should hold our AGM at the end of
April, consistent with our normal timing. The
safety of our colleagues, shareholders and
Travis Perkins plc Annual Report and Accounts 2020
79
Financial statementsGovernanceStrategic report Corporate governance report continued
Division of Responsibilities
Chairman and Chief Executive
The Chairman leads the Board and ensures its
effectiveness. Stuart Chambers was
independent on appointment and remains so
as assessed against the criteria set out in
provision 10 of the Code. 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 Chief Executive which is
reviewed annually and is available on the
Group’s corporate website.
Non-executive Directors
The Board ensures that at least half of its
members, excluding the Chair, are
independent non-executives and annually
reviews any relationships or circumstances
which are likely to affect their independence.
None of the circumstances set out in the
provision 10 of the Code apply and the Board
is satisfied that all Non-executive Directors
remain independent.
Pete Redfern was appointed as the Senior
Independent Director (“SID”) with effect from
28 April 2020. The SID acts as a sounding
board for the Chairman and an intermediary
for Directors and shareholders. The SID’s
responsibilities are set out in writing and are
available on the Group’s corporate website.
The SID is available to shareholders should
they wish to raise an issue through an
alternative channel. The Non-executive
Directors led by the SID meet without the
Chairman present annually to discuss the
Chairman’s performance and any other
matters as required.
The Non-executive Directors provide
constructive challenge, strategic guidance and
appraise Executive Directors’ performance
using against agreed performance targets.
The Non-executive Directors and Chairman
meet regularly without the Executive Directors
present to review the performance of the
Executive Directors against such agreed
performance targets.
Conflicts of interest and
Raising Concerns
Declarations of any actual or potential
conflicts of interest with items on the agenda
are requested and made at the start of every
Board and Committee meeting.
Directors complete a questionnaire annually
of potential or actual conflicts of interest and
their activities throughout the year. Those
potential conflicts are reviewed by the Board
as a whole and if necessary, mitigating
actions are taken and recorded on the
Conflicts of Interest register. The impact of
any relationships or involvements are
considered carefully to ensure that they do
not compromise or override the Directors’
ability to exercise independent judgement.
Concerns in relation to the operation of the
Board can be raised with the Chairman or the
Senior Independent Director. No such
concerns were raised during the year.
During 2020 the principle of “calling it out”
was reinforced across all parts of the Group.
In support of this and the launch of a new
Group wide Code of Conduct, the Speak Up
line was relaunched. Like the Code of
Conduct, the Speak Up line is focused both
internally and externally and thus available to
customers, suppliers and anyone else who
interacts with our business, as well as
colleagues. The line enables anyone to call
out any issues related to our business which
are causing concern or just don’t feel right.
We have improved the governance and
oversight of the Speak Up line by involving a
broad cross section of appropriate specialists
from the Group in the investigation and
management of reports made to the Speak
Up line. Summaries of reports made to the
Speak Up line are now reported quarterly to
the Audit Committee and escalated to the
Board where necessary.
An annual review of issues highlighted
through the Speak Up line is undertaken with
the Board. Through the evolution of our
approach, we expect to gain richer
information on issues of concern or patterns
of behaviour, highlighting potential cultural
hotspots within the Group, where any exist,
and better managing the risk presented to
the Group by any pockets of unidentified
poor culture which develop. By taking
proactive steps to manage the Group’s
cultural and compliance risks in this way we
can actively mitigate the impact of such risks.
Time Commitment
When making new appointments the Board
carefully considers the competing demands
on candidates’ time. Prior to appointment,
candidates are required to disclose any
significant commitments along with the
estimated associated time commitment.
Each Non-executive Director’s letter of
appointment sets out the time commitment
expected of them and these letters will be
available for inspection at the Annual
General Meeting.
The Board considers on an annual basis the
time commitments of each Director and it is
satisfied that all Directors continue to have
sufficient time available to fulfil their duties.
Any new external appointments during the
year are given careful consideration, taking
into account the number and scale of each
Director’s other commitments before
approval is given and recorded.
The Company allows Executive Directors to
hold no more than one external Non-
executive Directorship with a listed entity.
So far as is practicable the Company liaises
with the Non-executive Directors to ensure
the schedule of meetings for the year does
not clash with external appointments.
Directors are able to attend meetings by
video link or telephone conferencing if there
is an issue with location or travel.
Board and Committee Meetings
The Board’s response to Covid-19 has been
swift, meeting virtually and regularly, ensuring
the Group is well placed to respond to the
changing situation. It has worked in tandem
with the Group Leadership Team to review in-
depth scenario planning, and engaged with
teams throughout the business, while setting
its expectations for the Group’s approach to
each of its stakeholder groups, mindful of
their respective needs.
The Board held seven scheduled meetings
in 2020. Regular items on the agenda
included detailed updates on health and
safety, progress against strategic objectives,
financial position and performance against
KPIs, and strategic reviews of business units.
Other areas of consideration included
funding, capital expenditure, investor
feedback, risk and governance. In response
to the Covid-19 pandemic, the Board has
focused especially on cash and liquidity
during 2020 along with associated items
such as debtor and creditor days, stock
levels and associated working capital.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Ordinarily, the Board makes at least two operational site visits and holds a specific strategy
meeting. It had been the Board’s intention to visit the Travis Perkins General Merchant site at
Milton Keynes for one of its meetings during the year, and to undertake an additional operational
visit at the Group’s Toolstation Europe business in the Netherlands. Unfortunately, the restrictions
of Covid-19 thwarted those plans and instead, apart from its meeting at the end of February which
was held in person at the Group’s offices in St Pancras, all of the Board’s meetings have been
conducted by video conference this year. The General Counsel & Company Secretary manages
the process of setting the agenda for each Board meeting which is agreed between the Chairman,
the Chief Executive and the Chief Financial Officer. A programme of work and key priorities is set
with the Board at the beginning of each year, with agendas based on the annual plan while
incorporating topical items and matters of particular concern or interest to the Board.
Key financial and other relevant information is circulated to the Board outside scheduled meetings
and is monitored by the Chairman to ensure that it is sufficient, timely and clear. In addition to the
other formal and informal interactions which occur, since the end of March, in light of the
pandemic the Chief Executive has provided the Board with an update email at the end of each
week reviewing the week that has gone before.
The Chairman meets regularly with Board members between Board meetings and ensures that they are
kept informed of material developments. At meetings the Chairman encourages debate and equal
contribution from each Board member within a transparent and constructive atmosphere.
The number of Board and Committee meetings attended by each Director during the year is set
out below.
PLC
Board
Audit
Committee
Nominations
Committee
Remuneration
Committee
Stay Safe
Committee
Overall
attendance (%)
Number of meetings
7
Attendance:
R Anderson
S Chambers
M Culver*
B Illingworth**
C McConville
P Redfern***
N Roberts
C Rogers****
J Rogers
A Williams
1/1
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
6
2/2
n/a
n/a
n/a
6/6
3/4
n/a
1/2
6/6
n/a
4
1/1
4/4
4/4
4/4
4/4
4/4
n/a
4/4
4/4
n/a
4
n/a
4/4
3/3
n/a
4/4
4/4
n/a
2/3
n/a
n/a
3
n/a
3/3
n/a
3/3
n/a
3/3
3/3
n/a
n/a
n/a
100
100
100
100
100
96
100
88
100
100
* M. Culver joined the Remuneration Committee on 3 March 2020
** B. Illingworth joined the Stay Safe Committee on 3 March 2020
*** P. Redfern joined the Audit Committee on 3 March 2020
**** C. Rogers stepped down from the Audit and Remuneration Committees on 3 March 2020 and was re-appointed to the
Remuneration Committee 28 April 2020
During 2020 a number of additional Board and Committee meetings were convened at short notice,
particularly as a result of the need to manage the dynamic environment associated with Covid-19.
PLC
Board
Audit
Committee
Nominations
Committee
Remuneration
Committee
Stay Safe
Committee
Overall
attendance (%)
Number of meetings
4
Attendance:
R. Anderson
S Chambers
M Culver
B Illingworth
C McConville
P Redfern
N Roberts
C Rogers
J Rogers
A Williams
n/a
4/4
4/4
4/4
4/4
4/4
4/4
4/4
2/4
4/4
2
n/a
n/a
n/a
n/a
2/2
2/2
n/a
n/a
2/2
n/a
5
n/a
-*
5/5
4/4
4/5
5/5
n/a
5/5
3/5
n/a
4
n/a
4/4
4/4
n/a
4/4
3/4
n/a
4/4
n/a
n/a
0
100%
n/a
0
0
0
0
0
0
0
0
0
n/a
100
100
100
93.3
93.3
100
100
63.6
100
* As additional Nominations Committee meetings were concerned with his succession, consistent with the requirements of
the UK Corporate Governance Code, Stuart Chambers did not attend.
Travis Perkins plc Annual Report and Accounts 2020
81
Financial statementsGovernanceStrategic report Corporate governance report continued
Group Leadership Team
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 CEO. The CEO
has established and chairs the Group
Leadership Team which comprises key
business and functional leaders.
Other colleagues are invited to attend Group
Leadership Team meetings from time to time
in relation to specific matters. The main
purpose of the Group Leadership Team is
to assist the Executive Directors in the
performance of their duties, particularly in
relation to the development and
implementation of strategy, operational
plans, policies, procedures and budgets;
the monitoring of operational and financial
performance; the assessment of control
of risk; and the prioritisation and allocation
of resources.
Provision of information and support
All Directors have direct access to the
General Counsel & Company Secretary who
is responsible for advising the Board on all
governance matters. Directors may also seek
independent professional advice at the
Company’s expense in the furtherance of
their duties as required.
Composition, succession
and evaluation
Board composition
As at 31 December 2020 the Board
comprised seven Non-executive Directors
and two Executive Directors. The biographies
of the Board are listed on pages 76 to 77.
Appointments
Appointments of new Directors are made by
the Board on the recommendation of the
Nominations Committee. The Nominations
Committee undertakes a rigorous and
comprehensive search and selection process
for new Directors, normally with the
assistance of a professional search firm.
Were the Nominations Committee not able
to use the services of a search firm, it would
place advertisements when conducting a
search for new Directors. The Nominations
Committee’s responsibilities and a description
of its work can be found in the Nominations
Committee Report on pages 84 to 86.
Re-election of Directors
All remaining Directors are considered to be
eligible, on the basis of performance and
contribution to the long-term sustainable
success of the Company, to submit
themselves for re-election at the 2021
Annual General Meeting. Stuart Chambers
will stand down from the Board on 31 March
and Chris Rogers will not be seeking
re-election.
Board effectiveness review
A rigorous evaluation of the performance of
the Board and its Committees is carried out
annually in order to identify efficiencies,
maximise strengths and highlight areas for
further development. Consistent with the
requirements of the UK Corporate
Governance Code, the effectiveness review is
facilitated by an independent external
facilitator every three years. An external
review was last conducted in 2018 by Lisa
Thomas at Independent Board Evaluation.
Neither Lisa nor Independent Board
Evaluation has any other connection with the
Company’s Directors or the Group. The next
external review will be conducted in 2021. In
2020 an internal evaluation was carried out
which identified the following key focus areas
for the Board in 2021:
• Culture
• Diversity
• Succession
• Drivers of Success & Metrics
• Consideration of Major Stakeholders
The SID undertook an evaluation of the
Chairman’s performance with input from the
Executive and Non-executive Directors and
the Non-executive Directors reviewed the
performance of the Chief Executive and
Chief Financial Officer. The performance of
all Directors was judged satisfactory.
The Board concluded that each Director
brings considerable expertise and experience
to Board discussions. The Board is satisfied
that each Director continues to contribute
effectively to Board debate and guides and
challenges management’s strategic plans
and their implementation.
Statement by the Board
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 28 to 43. 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 119.
Going concern
After reviewing the Group’s forecasts and
risk assessments and making other
enquiries, the Board has formed the
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’s ability to successfully manage
the principal risk and uncertainties
outlined on pages 44 to 51 during periods
of uncertain economic outlook and
challenging macroeconomic conditions
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 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 Audit Committee Chairman
on that Committee’s meeting to review the
preparation and content of the year-end
financial statements and the audit conducted
upon them reviewing the contents of the
Annual Report and Accounts, 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 under the Statement of Directors’
Responsibilities on page 119.
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Other information
As part of its viability review, the outcome of
which is set out on page 43, the Board
considered the principal risks and
uncertainties and mitigating factors set out
on pages 44 to 51.
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 to the date of approval of this Annual
Report, and concluded that they are effective.
Remuneration
The Board has established a Remuneration
Committee comprising four independent
Non-executive Directors and the Chairman of
the Board. The Remuneration Committee’s
responsibilities and a description of its work is
set out in the Remuneration Committee
Report on pages 93 to 116.
The Governance Report has been approved
by the Board of Directors and is signed on its
behalf by:
Stuart Chambers
Chairman
1 March 2021
Audit, risk and control
The Board has established an Audit
Committee comprising three independent
Non-executive Directors. The Audit
Committee’s responsibilities and a
description of its work is set out in the Audit
Committee Report on pages 87 to 92.
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
Group Leadership Team 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 the Group
Leadership Team and senior management,
but the Audit Committee reviews and
discusses 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
Group Leadership Team 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 improvements 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.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Nominations Committee report
2020 focus areas
– Appointment of Jasmine
Whitbread as Chair
– Committee chairman and
Senior Independent Director
appointments
– Succession planning for
senior management roles
– Board and executive
diversity
Number of scheduled meetings
during 2020
4
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Travis Perkins plc Annual Report and Accounts 2020
Stuart Chambers
Chairman, Nominations Committee
1 March 2021
Dear Shareholder,
As Chairman of the
Nominations Committee,
I am pleased to present
the Committee’s report
for the year ended
31 December 2020.
In my report last year I said that the
Committee had a particularly busy 2019.
2020 has been no different. During 2020 the
Committee focused on diversity, both on the
Board and in the executive team and their
respective pipelines, and on the search for
and appointment of a new Chair of the Board.
I am very pleased to report that in
conjunction with Egon Zehnder the
Nominations Committee conducted a
successful search process for a new Chair
resulting in the recommendation to the Board
that Jasmine Whitbread be appointed. I am
equally pleased to be able to report that
Jasmine has accepted that appointment and
will join the Board as a Non-executive
Director and Chair on 31 March 2021.
Consistent with the requirements of the UK
Corporate Governance Code 2018, Pete
Redfern, as Senior Independent Director,
chaired the Committee while it dealt with the
Chair succession and he skilfully guided the
Committee through the process. I did not
participate. I am confident that in Jasmine,
the Company has appointed a highly
experienced and capable new Chair who is
well versed in the world of public companies
and governance.
Other information
Moreover, Jasmine brings with her a fresh
perspective on ESG matters, developed
during her executive career in the third sector.
ESG is a subject of significance for all
businesses whose prominence has
undoubtedly been amplified during 2020.
Jasmine’s experience in this area will
significantly benefit the Company’s approach
to ESG. Other than the use of their services in
search assignments, the Company’s
Directors and the Group have no other
connection with Egon Zehnder.
With Jasmine’s appointment the gender
balance of the Board will improve to one third
which means at the end of March 2021 we
will meet the minimum target set out in the
Hampton Alexander review for female
representation on FTSE 350 boards. Whilst
that represents progress, our journey to
greater diversity by no means ends there and
the Committee is committed to further
improving the gender balance on the Board.
Diversity is about much more than gender of
course and we recognise that our Board does
not reflect the diverse ethnicity of the UK
population or our customer base, which is
drawn from that population. The Committee
and the Board are committed to achieving
greater ethnic diversity and our target is to
have appointed a Director from an ethnic
minority background during 2021.
Were we to stop at gender and ethnicity in
our efforts to improve the diversity of the
Board we would be focusing on a small
number of attributes to the detriment of
diversity of background, experience and skills.
All of those broader facets of diversity must
also be considered by the Nominations
Committee in order ensure that the
Company is led by a diverse Board equipped
with the necessary skills and experience to
lead the Company successfully. The
Committee uses a “skills matrix” to routinely
review the diversity and balance of skills and
experience amongst the Directors and to
identify future potential gaps. Regular review
ensures the Committee has an up to date
understanding of the Board’s balance of
skills, experience and diversity required to
plan succession and inform the recruitment
of new Directors. With the addition of Blair
Illingworth and Marianne Culver to the Board
last year, the Committee strengthened the
Board’s experience in the building products
and distribution and logistics sectors. Nick
Roberts has brought further extensive, deep
experience of construction, engineering and
strategy to the Board. During the year the
Committee identified new relevant categories
for inclusion in the skills matrix, namely, online
/ digital, customer experience and ESG.
Although there is some experience of those
areas amongst the Directors, the Board felt the
need to strengthen experience in those areas
when making future appointments.
When we published our Annual Report last
year, Chris Rogers was to have stepped down
from the Board at last year’s AGM in order to
take up the role of Chairman of Wickes plc. In
anticipation of that, Chris stood down from
the Audit and Remuneration Committees in
February 2020 and his succession as Senior
Independent Director was being planned.
When, at the end of March 2020 the Board
took the difficult decision to pause the
demerger of the Wickes business, Chris was
asked to re-join the Remuneration
Committee and subsequently in April,
following review and recommendation to the
Board by the Nominations Committee, the
Board appointed Pete Redfern as Chris’
successor as Senior Independent Director.
Looking forward to 2021, with the Board’s
decision to seek the demerger of the Wickes
business during the year, Chris Rogers has
again agreed to Chair Wickes Plc once it has
demerged from the Group and accordingly,
he will not be standing for re-election at the
Company’s AGM in April 2021. The
Nominations Committee is already working
with an external search firm in anticipation of
Chris’s departure to identify candidates to join
the Board, also addressing the skills and
experience enhancements mentioned earlier.
Other than the use of their services in search
assignments, the Company’s Directors and
the Group have no other connection with
Russell Reynolds.
During the year, with the assistance of Emma
Rose, the Group’s HR Director who was
appointed in June 2020, the Committee
undertook a review of the internal succession
pipeline for the roles of Chief Executive and
Chief Financial Officer, as well as other senior
management roles. Successors to those roles
need to have broad experience, which can
only be built over time. The skills matrix used
to assist the Committee when recruiting new
Directors is also used to help inform the
development of an internal pipeline for Board
roles along with a detailed assessment of the
skills, diversity and experience of the senior
management team, which helps to inform
the pipeline for senior management roles
generally. During the year, the Group
Leadership Team was expanded to include
the Managing Directors of the Group’s
business units. Of a Group Leadership Team
(the most senior executives in the business)
comprising 13 executives, three are female
but none has an ethnic minority background.
The Board is working with the executive team
to improve diversity amongst the Group’s
senior management and to build a more
diverse pipeline for senior management
roles, including the Group Leadership Team
and their direct reports.
Committee Membership
All Non-executive Directors (see biographies
on pages 76 to 77) are members of the
Nominations Committee. Except when
dealing with matters relating to the
chairmanship of the Company, the
Committee is chaired by Stuart Chambers.
Once she has been appointed to the Board,
Jasmine Whitbread will chair the Committee.
Directors, other employees of the Group and
external advisors are invited to attend
meetings when appropriate.
The Committee held four scheduled and five
unscheduled meetings during the year.
Attendance in 2020 is set out on page 81.
Role of the Nominations Committee
The principal responsibilities of the
Committee are to regularly review the
structure, diversity, size and composition of
the Board, to support the Board in fulfilling its
responsibilities to ensure that effective
succession planning processes and pipelines
are in place for Directors and other senior
management. The Committee ensures there
are formal, rigorous and transparent
processes in place for the appointment of
Directors and other senior managers.
The Committee operates under formal terms
of reference which are available on the
Group’s corporate website
www.travisperkinsplc.co.uk.
Activities in 2020
The principal activities undertaken by the
Committee in the year were:
• Conducting a search process to identify a
successor for the Chairman of the Board
• Planning Board composition changes
• Succession planning for Board
Committee and other Board roles, notably
the Stay Safe Committee Chair and
Senior Independent Director roles
• Overseeing the development of a diverse
internal pipeline for succession to senior
management roles.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Nominations Committee report continued
Focus for 2021
The Committee will focus on Board, senior
management and pipeline build and
diversity along with specific search activity in
light of Chris Rogers’ planned departure
from the Board.
Process for appointments
Through a rigorous selection process,
appointments to the Board are made on
merit and against an agreed set of specific
and objective criteria. The Committee
oversees this process on behalf of the Board
and advises the Board on the identification,
assessment and selection of candidates.
The appointment process includes:
1. Agreeing the key skills, attributes and
business experience required for the role
as well as diversity priorities
2. Preparing a role description
3. Engaging independent search consultants
4. Conducting a market search via the
search consultants
5. Preparing a “long list” of candidates,
taking into account diversity
considerations and the Committee’s
review of the composition, experience
and skill sets of the Board
6. Selecting a shortlist of candidates which
meet the Committee’s criteria
7. A selection of Committee members
interviewing those candidates
8. Candidate assessments
9. Interviews with remaining Board
members
10. Taking up detailed references
11. Making a recommendation to the Board
In addition to relevant background
information on the work of the Board and the
business to date, appointees are provided
with a programme of induction meetings and
visits with key personnel and to key areas of
the businesses within the Group.
Board diversity
The Nominations Committee and the Board
recognise the advantages diversity brings to
the Group. The Hampton Alexander Review
and the Parker Review both reflect broader
societal concern over issues of gender and
ethnic diversity and Travis Perkins supports
the recommendations of both. While gender
and ethnicity are key elements of diversity,
they are not the only ones. Diversity of skills,
experience and backgrounds also brings
competitive advantage to organisations. The
Nominations Committee will strive to achieve
diversity in all senses in Board and senior
management appointments and will provide
oversight of the adoption of the same
approach to diversity in the pipeline for Board
and senior management roles, and more
broadly in the approach which is taken to the
recruitment of colleagues at all levels of the
Group. Led by senior management, the
Group has embarked on a structured
programme to improve diversity in the Group
and further details of the Group’s diversity
and inclusion programme can be found on
pages 62 to 63.
DTR 7.2.8AR requires companies to provide a
description of their diversity policy applied to
their administrative, management and
supervisory bodies with regard to aspects
such as age, gender or educational and
professional backgrounds, the objectives of
their diversity policy, how their diversity policy
has been implemented and the results in the
reporting period. This Nominations
Committee report together with the
Company’s report on its diversity and
inclusion policies and activities at pages
62 to 63. of the Annual Report provide an
explanation of the Company’s diversity policy
for the purposes of the Disclosure and
Transparency Rules.
Stuart Chambers
Chairman
1 March 2021
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Travis Perkins plc Annual Report and Accounts 2020
Audit Committee report
Other information
2020 focus areas
– Financial reporting
judgements related
to Covid-19
– Internal audit and risk
management progress
– Separation of Wickes and
demerger process
– Controls around
government relief schemes
Number of scheduled meetings
during 2020
6
John Rogers
Chairman, Audit Committee
1 March 2021
Dear Shareholder,
I am pleased to present the
Audit Committee’s report for
the year ended 31 December
2020, having been
appointed as Chairman of
the Committee on 3 March
2020. The report sets out
the Committee’s work in
relation to financial reporting,
internal audit, risk
management and oversight
of the external audit process.
The Committee has reviewed financial
reporting judgements and monitored internal
controls and the management of risk arising
from Covid-19. This has included reviewing
the impact of Covid-19 on key financial
reporting judgements, impairment reviews
performed outside the normal review cycle,
the going concern basis of preparation and
the operation of key controls affected by the
move to remote working in March 2020.
During the year the Committee has
monitored the execution of the internal audit
plan and the risk management process plan,
against which notable progress has been
made. The 2021 plans were approved by the
Committee and aim to build on the progress
made in these areas.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report
Audit Committee report continued
I will be available at the Annual General
Meeting to answer any questions about the
work of the Committee.
Committee membership
and attendance
On 3 March 2020 Ruth Anderson stepped
down from the Board and her role as Audit
Committee Chairman and Christopher
Rogers stepped down from the Committee.
John Rogers assumed the chairmanship and
Pete Redfern joined the Committee on
3 March 2020.
All members are independent Non-executive
Directors. Two of the members have recent
and relevant financial experience and all
members have competencies 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 76 to 77).
The Group Head of Legal became Secretary
to the Committee in May 2020, replacing the
Deputy Company Secretary.
The Committee held six formal meetings
during 2020. Attendance is set out below.
The Chairman, Chief Executive, Chief
Financial Officer, General Counsel &
Company Secretary, Director of Group
Finance, Director of Internal Audit, Group
Chief Accountant and external auditors also
attended the Committee’s meetings. The
Committee held separate meetings with the
Director of Internal Audit and external
auditors without the presence of management
and held separate meetings with
management without the external auditors.
Attendance of members at the Committee’s
meetings during the year can be found in the
Corporate Governance Report on page 81.
Role of the Audit Committee
The Audit Committee assists the Board in
fulfilling its oversight responsibilities. The
main roles and responsibilities of the
Committee include:
• To monitor the integrity of the financial
statements of the Company and any
formal announcements relating to the
Company’s financial performance,
which includes reviewing significant
financial reporting judgements
contained within them
• To review the effectiveness of the
Company’s internal financial controls
and internal control and risk
management systems
• To monitor and review the effectiveness
of the Company’s internal audit function
• To maintain an appropriate relationship
with the Company’s external auditors and
to review and monitor their independence,
objectivity and effectiveness in carrying
out the audit process, taking into account
relevant UK professional and regulatory
requirements
Work of the Committee
The Committee functions around an annual
work plan. This work plan is regularly
reviewed by the Committee to ensure that it
continues to include all matters for which
consideration must be given in order to meet
the Committee’s corporate governance
responsibilities.
The Committee duly considers the content of
the Annual Report and Accounts, the results
announcements prepared by management
and the associated press releases 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 judgements
made during the preparation of the Group’s
interim and annual accounts.
In addition, during the year, the Committee
reviewed:
• The Group’s systems of controls, the
effectiveness of controls and
management’s continuing controls
improvement initiatives
• The risk, controls, financial reporting and
going concern impacts of Covid-19
• The Group’s approach to risk, key risks
and the effectiveness of the risk
management framework
• Progress reports on information security
initiatives and other security matters
• The external audit plan and findings
• The internal audit plan and strategy for
the further development of internal audit
activities
• The effectiveness and independence of
internal audit and the external auditors
In addition to the above specific matters, the
Committee considered at each of its
meetings a number of standing agenda
items:
•
• Progress on implementing
Internal audit reports
recommendations arising from internal
audit work
• Non-audit fees
The Committee places reliance on regular
reports from management, internal audit and
the external auditors in order to carry out the
activities set out above. The Committee is
satisfied that it received sufficient, timely and
reliable information to enable it to fulfil its
responsibilities during the year.
At each meeting of the Committee, an
opportunity is provided for the Committee to
meet with the internal and external auditors
without management present.
The Board is updated on key matters and
recommendations following each Audit
Committee meeting.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Significant issues related to the financial statements
The Audit Committee has assessed whether suitable accounting policies have been adopted by the Group and whether management has made
appropriate judgements and estimates.
The table below sets out the key judgement areas associated with the Group’s financial statements for the year ended 31 December 2020 that
were considered by the Audit Committee. This is not a complete list of all accounting issues, estimates and policies, but includes those which
the Committee believes are the most significant.
In reaching its conclusions, set out in more detail in the table, the Committee considered papers and explanations given by management,
discussed each matter in detail, challenged assumptions and judgements made and sought clarification where necessary. It reviewed and
discussed any internal audit reports in respect of the matters under consideration and the Committee also received a report from the external
auditors on the work undertaken to arrive at the conclusions set out in their audit report on pages 122 to 130 and had the opportunity to discuss
it with them in depth.
Area
Issue and nature of judgement
Factors considered and conclusions reached
Accounting for inventory and
inventory valuation
To meet customer expectations the Group
carries a wide range of inventory in around
2,000 locations.
During the year management regularly reported on inventory
valuation and provisioning to the Committee and did so again at its
meeting to consider the year-end Annual Report and Accounts.
Expected
credit loss
assessment
Inventory should be included in the balance
sheet at the lower of cost or net realisable
value. At 31 December 2020 stock was
valued at £840.7m.
The determination of cost is made more
difficult by the ageing accounting systems and
also by material rebate and fixed price discount
agreements, so requiring regular reconciliations
in areas such as accruals for goods received
not invoiced.
The Group recognised £4.4bn of credit sales in
2020 to a wide range of account customers,
from sole traders through to some of the largest
contractors in the UK. A total of £661.7m was
outstanding as at 31 December 2020. In the
context of Covid-19’s pervasive impact on the
UK and its economy, the calculation of expected
credit loss is judgemental.
The Committee reviewed and discussed the information
presented about gross inventory values and the adjustments
made by management to reduce inventory 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 inventory was
fairly stated in the balance sheet.
Further information is given in the notes to the financial
statements (note 11 – inventories and note 12 – supplier income).
During the year the Committee received reports that enabled it to
monitor cash collection and debtor provisioning and it discussed
the Group’s adherence to its accounting policies and procedures.
A summary of overdue balances in the balance sheet as at
31 December 2020 and amounts written-off during the year was
given to the Committee at the meeting held to consider the year-end
results. Management presented the Committee with information on
the credit losses the Group suffered in previous recessions and an
assessment of the risks in the Group’s trade receivables balance
based on third-party analysis. The Committee reviewed
management’s judgements regarding the estimates of expected
credit loss, the adjustments made for forward-looking information
and the amounts included in the balance sheet.
The Committee concluded that the controls over the assessment of
expected credit losses were appropriate and that the £30.5m
allowance for doubtful debts was fairly stated.
Further information is given in the notes to the financial statements
(note 13– trade and other receivables).
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Audit Committee report continued
Area
Issue and nature of judgement
Factors considered and conclusions reached
The carrying value of goodwill
and other intangible and
tangible fixed assets
The Group balance sheet contains £1,671m of
goodwill and other intangible assets and £830m
of tangible fixed assets.
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.
The Directors are required to determine whether
those assets have suffered any impairment
whenever there are indicators of possible
impairment and at least annually. 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
£2,727m of investments. 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.
Financial reporting impacts of
Covid-19
The pervasive impact of Covid-19 on the
economy and on the Group has affected almost
all financial reporting judgements.
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 these 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 made acceptable judgements. The
Committee noted that the value-in-use models used by
management showed all material cash-generating units except
for Wickes had significant headroom and concluded that there
were no impairments.
Consistent with the judgements reached in 2019 on the
implications of the planned demerger of the Wickes business for
the carrying value of goodwill, the Committee concluded that it
remained appropriate to use a value-in-use model for the 2020
impairment review. The Committee concluded that the
disclosures in the Annual Report and Accounts on the possible
accounting impact of the planned demerger in 2021 and on
sensitivity of the Wickes business to impairment were suitable.
The Committee received reports on the ongoing project to
simplify the Group’s legal structure and the impairments
recognised by the Company as a result of the payment of
internal dividends.
Further information is given in the financial statements
(note 28 – impairment and, in the Company’s financial
statements, note 2 – investments in subsidiaries).
During the year management regularly reported on the
accounting impacts of Covid-19. The Committee reviewed and
discussed the information presented about its impact on the
allowance for doubtful debts, the valuation of inventory, the
recognition of supplier income and the measurement of
corporation tax in the Group’s interim financial statements.
Due to Covid-19 and its impact on the UK economy and the
Group, impairment reviews were performed on the Travis
Perkins General Merchant, BSS, CCF, Keyline, Plumbing &
Heating and Wickes businesses and on their branches and
stores as at 30 June 2020, outside of the normal cycle of
impairment reviews.
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 the impacts of
Covid-19 were appropriately reflected in the estimates and
judgements made in the preparation of the Annual Report and
Accounts and the interim financial statements.
The Committee considered the impact of Covid-19 on the going
concern basis of preparation and challenged the assumptions used
by management in preparing adverse scenarios and sensitivity
analysis. Noting the trading performance of the Group throughout
the periods of significant restriction and the Group’s financing
position, the Committee concluded that the use of this assumption
without any material uncertainty to be appropriate.
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Travis Perkins plc Annual Report and Accounts 2020
Internal audit
Internal audits are delivered by an in-house
team, supported as needed by co-source
partners that bring specialist knowledge and
skills to audits in areas such as IT.
Internal audit undertook assurance activities
throughout 2020, with the majority of audits
delivered remotely from the end of March
onwards. The Group’s digital tools were used
to conduct virtual meetings and workshops,
share screens, and access and review data
remotely, which has enabled audit activity to
continue and increased the use of data and
technology in audit delivery.
Annual audit plans focus on areas of
significant risk, development and change
within the Group. The annual plan of activity,
reviewed and approved by the Audit
Committee, is constructed through internal
audit’s evaluation of risk against a
comprehensive audit universe for the Group.
The Group Leadership Team and other key
stakeholders in the business are consulted to
ensure that new developments and key
priorities for management have been
considered. Audit activities and progress
against the agreed audit plan are reviewed at
each Committee meeting and updated as
business priorities and risks change.
The original 2020 audit plan had to be
reshaped to respond to new and changed
risks for the Group as a result of the Covid-19
pandemic. This included a review of the
potential impact of remote working on the
operation of financial controls and an
assessment of the processes and controls
introduced to manage the Group’s use of the
Coronavirus Job Retention Scheme. More
broadly, the audits delivered during 2020
covered a broad range of operational,
financial, legal, regulatory, IT and
transformation activities. Core financial
control areas are audited regularly. In 2020
this included the review of half-year and
year-end statements from the Group’s
businesses on their compliance with key
internal financial controls and the actions
taken to manage changes to controls
resulting from remote working and furlough.
The internal audit function has a continuous
improvement strategy, with progress against
this plan regularly reported to the Committee.
Initiatives continued during 2020, with a
particular focus on documenting the
function’s processes and undertaking
data-led audits. Expanding this use of data
and analytics is a key focus for 2021 as a
means to increase the level of assurance and
insight provided by each audit.
At each meeting the Committee considered
reports from internal audit setting out the
findings from the audits carried out. It also
continued to review the implementation of
recommendations proposed by internal audit
and agreed by management, through a
system that tracks activity on all active
recommendations by age and level of risk to
the business.
During the year the Committee reviewed the
effectiveness of the internal audit function
both in relation to delivery against its plans
and against recognised attributes of a
high-performing internal audit function.
Based on the progress made, the Committee
was satisfied with the overall effectiveness of
the function throughout 2020.
Risk management and
internal controls
Risks are managed at a Group level or within
the businesses on an ongoing basis. Details
of risks faced by the Group are maintained in
Group or business risk logs. Key risks are
regularly collated and reviewed by the Group
Leadership Team and the Board to assess
the potential impact and likelihood of
occurrence, after taking into account key
controls and mitigating factors, as well as
interdependencies. Additional mitigating
actions are put in place as required to
manage risks to an acceptable level.
Significant time was spent in 2020
considering the risk impacts of the Covid-19
pandemic, which presented new risks and
also heightened certain existing risks for the
Group. The risks associated with the UK’s exit
from the European Union were also
considered in detail throughout the year. In
both areas, detailed reports were regularly
provided to the Board and Group Leadership
Team to support assessment of the potential
impacts and steps taken by the Group.
The Group’s approach to risk management
continued to be refined during 2020 and this
will continue in 2021. There has been a
particular focus in 2020 on developing and
delivering the risk assessments required by
newly developed minimum standards that
underpin the 12 material ESG focus areas for
the Group. This work will continue into 2021.
The Audit Committee recently approved a
plan to drive more targeted consideration of
risks and opportunities within the Group’s key
strategic and performance review processes
in 2021, which will strengthen the risk
management framework.
Other information
The principal risks and uncertainties are set
out on pages 44 to 51, together with
information on how those risks are mitigated
and how emerging risks are assessed.
The Audit Committee monitors the key
elements of the Company’s internal control
framework throughout the year. The Covid-19
pandemic has necessitated a number of the
Group’s assurance mechanisms to be paused
during lockdowns or to move to remote
review and support. The Committee has
received regular updates on the status of
these activities and the impact of the
pandemic on assurance provision during
2020. The Committee conducted a review of
the effectiveness of the Company’s risk
management and internal controls, and
considered the impacts of the Covid-19
pandemic, concluding that they remain
effective. 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.
Management has continued its initiatives to
improve the control environment, which has
developed over many years. There are a
number of system replacements under
consideration, including a new finance
system, that will enhance and improve the
Group’s control framework and lead to
greater consistency and automation of
controls. The Audit Committee will monitor
progress through the year and reviewing the
system transformation programmes will
remain an area of focus for internal audit.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Audit Committee report continued
External auditor
KPMG LLP has been the external auditor
since 2015. There are no contractual
restrictions on the Group with regard to this
appointment. The Company will re-tender
the external audit in accordance with the
timescales set out in the Financial Reporting
Council’s guidance.
Audit scope and effectiveness
The scope of the external audit of the 2020
Annual Report and Accounts was presented
by the external auditor to the Committee in
September 2020 so the Committee could
discuss and challenge the audit plan and
understand 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
• The provision of non-audit services
Financial Reporting Council
During 2020 the Committee monitored
the Group’s engagement with external
stakeholders relevant to the Committee’s areas
of oversight, including the Financial Reporting
Council (the “FRC"). In particular, during the
year the Group received a letter from the
Corporate Reporting Review Team of the FRC
in relation to the Group’s 2019 Annual Report
and Accounts, as part of its regular review
and assessment of the quality of corporate
reporting in the UK. This letter did not raise any
specific questions or queries but did note a
number of matters where they believed that
users of the accounts would benefit from
improvements to the existing disclosures.
This review considered compliance with
reporting requirements and does not
provide any assurance over the disclosures
that were reviewed. The FRC (which includes
the FRC’s officers, employees and agents)
accepts no liability for reliance on them by
the Company or any third party, including
but not limited to investors and
shareholders. All the proposed specific
enhancements to the 2019 accounts have
been taken into account in the preparation
of this Annual Report and Accounts.
In addition, the Financial Reporting Council’s
Audit Quality Review Team (“AQRT”)
reviewed KPMG’s audit of the Group’s 2018
financial statements as part of their annual
inspection of audit firms. The Committee
received `and reviewed the final report from
the FRC in March 2020. The Committee was
satisfied that the matters raised by the AQRT
were appropriately incorporated into the
2020 audit plan.
Independence and objectivity
One of the Committee’s responsibilities is
to ensure compliance with the Board’s
policy on services provided by and fees
paid to the external auditor. The policy
sets out the work that is permitted to be
performed by the external auditor and
the work that is prohibited.
The process for approving all non-audit work
provided by the external auditor is overseen
by the Committee in order to safeguard the
objectivity and independence of the auditor.
The Committee considers whether it is in the
interests of the Company that the services
are purchased from KPMG LLP rather than
another supplier. In 2020 KPMG was
engaged to provide non-audit services in
relation to the maintenance of the Group’s
employee benefits system and the demerger
of the Wickes business. All non-audit services
were pre-approved by the Committee.
The audit firm was considered the most
appropriate firm to carry out the reporting
accountant work for the Wickes demerger
given its knowledge of the Group and the
synergies that arise from running this
engagement alongside the main audit.
The provision of non-audit services by KPMG
in relation to the employee benefits system
ceased in February 2020.
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 previous two
years’ audit fees.
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 4 to the accounts,
during the year the auditors were paid
£1,592,000 (2019: £1,100,000) for
audit-related work and £600,000
(2019: £616,000) for non-audit work. The
increase in the audit fee is the result of the
Group’s expansion in Europe and changes in
audit scope. Non-audit work related to the
review of the Group’s interim financial
statements and the Wickes demerger. The
total fees paid by the Group to KPMG LLP in
2020 amount to less than 0.1% of KPMG’s
UK fee income. In addition, £1.0m (2019:
£7.3m) of fees were paid to other accounting
firms for non-audit work.
Assessment of the external auditor
Having considered the external auditor’s
performance, the AQRT report 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 that KPMG LLP be reappointed
by shareholders at the Annual General
Meeting on 27 April 2021.
This report has been approved by the Board
of Directors and signed on its behalf by:
John Rogers
Chairman, Audit Committee
1 March 2021
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Travis Perkins plc Annual Report and Accounts 2020
Directors’ remuneration report
Other information
2020 focus areas
– Policy review including a
proposed Restricted Share
Plan
– Shareholder, proxy and
advisor consultation
– Remuneration impacts of
Covid-19
Number of scheduled meetings
during 2020
4
Coline McConville
Remuneration Committee Chair
1 March 2021
Dear Shareholders,
As Chair of the Remuneration
Committee, I am pleased to
introduce the 2020 Directors’
Remuneration report (“DRR”).
Response to Covid-19
Since the outbreak of Covid-19 the highest
priority for the Board has been the health and
safety of our colleagues, customers, suppliers
and all other stakeholders. During the year
the management team quickly and efficiently
responded to the pandemic, ensuring the
Group continued to operate safely and
effectively, fulfilling its essential role of
supplying materials to keep customers warm,
dry and secure at a time of great uncertainty.
Despite these great efforts financial
performance has inevitably been heavily
impacted. For this reason the company
will be paying no bonuses in respect of
2020 other than for a small number of
frontline colleagues.
Policy Review
The last two years have been a period of
significant change for Travis Perkins. In
December 2018 we announced the strategic
evolution of the Group to focus on serving
trade customers through advantaged
businesses in attractive markets as well as
the simplification of the Group to reduce
complexity and costs in order to drive
improved returns. In August 2019 Nick
Roberts was appointed CEO to execute
our strategy.
Travis Perkins plc Annual Report and Accounts 2020
93
Financial statementsGovernanceStrategic report Directors’ remuneration report continued
At the 2020 AGM we were required to put
forward a new policy in-line with the
three-year renewal cycle. Against the
backdrop of our strategic evolution and after
consultation with shareholders, the
Remuneration Committee concluded that
2019 was not the right time to undertake a
detailed review of our Remuneration Policy.
Our renewed 2020 policy was therefore
largely unchanged from our previous policy.
Following our progress in implementing
strategic and operational changes during
2019 and 2020, the Committee has
undertaken a detailed review of the policy to
evaluate whether it continues to support the
execution of the strategy and the creation of
shareholder value, under the leadership of
our new CEO, Nick Roberts.
Supporting strategy through our
Remuneration Policy - Restricted Share Plan
Our strategic intent remains to focus on trade
and simplify the group. To deliver our
strategy and create value for shareholders we
need to simplify our business, to enhance
collaboration by leveraging our assets and
resources to expand our proposition to
customers, and to modernise our technology
and infrastructure to digitally enable
customer interactions providing a more
efficient customer experience. We need to
invest and make changes now and over the
next few years to ensure that we have a
business that is agile and fit for purpose to
enable us to achieve our vision and deliver
enhanced shareholder value.
For Executive Directors we currently operate
an annual bonus plus two performance
based long-term incentive plans (each of
which incorporate multiple performance
measures). We are proposing to replace our
current long-term incentive plans with a
Restricted Share Plan (“RSP”). We believe
that a move to a Restricted Share Plan will
have a number of benefits for the Company
and will support the delivery of our strategy
and shareholder value creation. The intention
is that the RSP will be the only long-term
incentive throughout the organisation so that
management at every level is aligned.
We have summarised the reasons why
the Group believe a RSP is right for
Travis Perkins:
Rewards long-term sustainable performance
Delivery of our strategy requires longer term
decision making in order to drive sustainable
value creation for shareholders. It is
important that we make the right decisions
today to achieve long-term success.
These decisions may not always maximise
short-term performance but making the right
decisions now is critical in enabling us to
deliver a strong, successful and sustainable
business over the long-term. The Committee
believes that three year performance targets
risk creating too much focus on delivering for
the medium rather than the long-term and
that a restricted share plan, which does not
rely on hitting three year targets, will better
support the longer-term, collaborative
decision making required to deliver superior
long-term shareholder value creation.
Aligns management and shareholders
The RSP will better align management with
the experience of shareholders through the
alignment of reward outcomes with the
share price.
Aligned to our culture
The RSP will be cascaded throughout the
organisation to other eligible colleagues and
better support our objectives of
organisational integration and fostering a
more collaborative culture. Working in
tandem with our existing all-employee share
purchase plan (which has had a take-up of
c.25% over recent years) it will enhance the
collective sense of share ownership
throughout the Group.
Simple and transparent
One of the key drivers for change is a desire
for simplicity and transparency. The move will
see a single plan replace two long-term plans.
Effective retention tool
The RSP is a clearer and more easily
understood incentive structure and will
therefore be a more effective retention tool.
The following provides a summary of the
proposed operation of the RSP:
• The maximum award will be 125% of
salary. This is a 50% reduction compared
to the current aggregate long-term
incentive opportunity under the PSP
(150% of salary) and the Co-Investment
Plan (100% of salary) reflecting best
practice and shareholder expectations.
• For Executive Directors awards will vest
75% on the third anniversary of the award
and 25% on the fifth anniversary. The first
tranche will be subject to a two year
holding period so that the total time
horizon is five years for the entire award.
• Awards will be subject to performance
underpins measured over the vesting
periods. The Committee will retain
discretion to scale back the level of payout
should the Company not meet an
underpin and to determine the appropriate
level of scale back in such circumstances.
The performance underpins are as
follows:
• ROCE performance of 9.0%. ROCE is
one of the business’ KPIs assessing
how successful our investments have
been in returning value to
shareholders. Return measures have
been a feature of our incentive plans
for a number of years. This underpin
level assumes the demerger of the
Wickes business
• Satisfactory governance performance
including no ESG issues that result in
material reputational damage to the
Company (as determined by the
Board)
Other changes to the Remuneration Policy
In addition to the introduction of the RSP we
are proposing to make some other changes
to our Policy and its implementation in 2021
intended to enhance alignment with the
delivery of our strategy and to take account
of evolving shareholder views.
Pensions
The Committee is sensitive to shareholder
views on executive pensions. On
appointment Nick Roberts’ pension was
aligned with the wider workforce at 10% of
salary. CFO Alan Williams’ pension had been
agreed at 25% on recruitment in 2017. From
1 January 2020 it was reduced and fixed at
£103,530 (equalling 20% at the time). Taking
into account shareholder expectations and
best practice, it will be further reduced to 10%
of salary with effect from 1 January 2023.
Annual bonus measures
We are proposing to simplify the
performance framework used for our annual
bonus to focus on delivering the short-term
goals which will contribute to the delivery of
our long-term strategy. The performance
measures that we are proposing for 2021 are:
• Adjusted operating profit (weighting: 50%)
• Free cash flow (20%)
• Strategic performance (30%): Delivery of
progress against key strategic milestones
and ESG measures.
Adjusted operating profit has been chosen
to ensure that there is a continued focus on
driving revenue and managing costs to deliver
profit to shareholders. Likewise free cash flow
is a critical measure for the business to ensure
that we have the resources necessary to
invest in the business transformation to
return value to shareholders.
94
Travis Perkins plc Annual Report and Accounts 2020
Other information
We have simplified the strategic measures to
ensure that management focuses on the key
milestones for the next 12 months as well as
the Group’s wider ESG priorities.
2018 Co-Investment Awards
Strong Cash Performance delivered through:
• Focussed stock management
•
Improved cash collection rates
from customers
• Working closely with our suppliers to
simplify payment processes
Annual bonus opportunity
Currently the annual bonus opportunity for
the CEO is higher than for the CFO (180% of
salary compared to 150% of salary), whereas
the long-term incentive opportunity is the
same. The Committee has reviewed this
approach and considers that, taking into
account the CFO’s enhanced role and
responsibilities, his contribution to the
execution of the strategy and operational
delivery and our more collaborative culture at
leadership level that it is appropriate that the
bonus opportunity, as a percentage of salary,
is the same for both roles. We are therefore
proposing to increase the bonus opportunity
for the CFO to 180% of salary.
Post-employment shareholding guidelines
Currently on leaving Executive Directors are
expected to maintain a minimum
shareholding of 1 x base salary (or actual
shareholding if lower) for a period of two
years following stepping down from the
Board. Taking into account feedback from
shareholders the Committee intends to
increase the post-employment shareholding
guideline to 2 x base salary for two years
to align with our in-employment
shareholding guideline.
Salary review
As part of the Group’s response to Covid-19,
the Board and Group Leadership Team
voluntarily reduced their salaries by 20% for
three months effective from 1 May 2020. The
Remuneration Committee reviewed Executive
salaries and, taking into account current
market conditions, determined that there
would be no increases from 1 January 2021.
Non-executive Directors fees increased with
effect from 1 July 2020. The base fee was
increased to £60,000 (from £58,661). The
fee for chairing the Stay Safe Committee was
increased to £12,000 (from £10,000)
reflecting the workload and significance
associated with this role.
2020 LTIP targets
In last year’s DRR we outlined our intention to
grant 2020 PSP and CIP awards in late
March 2020. However, in light of market
uncertainty following the outbreak of
Covid-19 the Committee chose to defer the
grants until conditions stabilised somewhat.
Awards were granted in September 2020
and the Committee reviewed and revised the
cash element only of the set of performance
targets originally disclosed in the DRR to
incorporate Wickes performance and to
reflect revised market expectations of
performance. We consulted with
shareholders on this issue.
2020 remuneration outcomes
The Covid-19 pandemic has provided the
most challenging year in the Company’s
history. The Company has had to adapt
quickly to ways of managing business
through periods of lockdown in a way which
keeps our colleagues, customers and
suppliers safe. It has been inevitable that
financial performance through this crisis has
been significantly impacted. Performance
against key financial objectives is as follows:
• Adjusted operating profit of £227m
(2019: £442m)
• ROCE of 5.5% (2019: 10.1%)
2020 bonus payout
Bonuses for Executive Directors are based on
adjusted operating profit (60%), ROCE (20%)
and performance against our strategic
tracker (20%). No bonus arises from the
financial metrics for 2020, and whilst there
has been strong progress against the
strategic tracker, the Committee and
management do not believe it would be
appropriate to award a bonus this year
against these outcomes.
Long-term incentives
Long-term incentive awards granted in 2018
vest based on performance to 31 December
2020. The vesting of these awards was
strongly impacted by the Covid pandemic. In
this context, the EPS growth target has not
been achieved. However strong cash and
capital management have resulted in long
term incentive plans targets being met for
cash measures. Further details on each
element of the long-term incentives is
provided below:
2018 PSP vesting
PSP awards granted in 2018 were subject to
Adjusted EPS (40%), TSR (20%) and cash
flow (40%) performance. The Adjusted EPS
performance was below the trigger required
for any vesting of this element of the award.
Aggregate cash flow over the three year
period was £1,112m which was above the
maximum target and resulted in the full 40%
of the cash flow element vesting reflecting
excellent cash performance in challenging
market circumstances. TSR performance
was at the 44th percentile resulting in no
vesting for this element. Overall 40% of PSP
awards granted in 2018 vested.
2018 Co-Investment Plan
These awards were subject to CROCE
performance. CROCE performance over the
three year period was 12.0% 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 considered that the level of
vesting under the PSP and Co-Investment
Plan in respect of 2020 to be an appropriate
reflection of performance over the last three
years and in particular the work management
have undertaken to deliver strong cash
performance. Vesting performance was
assessed net of Government support in
relation to the Covid-19 pandemic. No
discretion was exercised by the Committee.
Finally, 2020 has been a challenging year for
our colleagues and I am pleased that we have
been able to provide financial and non-
financial support during periods of furlough
or where colleagues have been working from
home. In addition, whilst we did not apply a
general salary increase in January 2021 we
boosted the salaries of our lowest paid
colleagues, taking a significant step towards
being a Real Living Wage employer.
We consulted extensively with all our major
shareholders as well as proxy and advisor
bodies over the past six months, listening
carefully to a wide range of views, and
incorporating feedback where we felt it was in
the best interests of the Company.
The Committee will be submitting its
remuneration policy and report to the 2021
AGM where the Policy will be subject to a
binding shareholder vote and the Report
subject to an advisory shareholder vote. I very
much look forward to receiving your support,
and will be available to answer any questions.
Coline McConville
Remuneration Committee Chair
1 March 2021
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report
Directors’ remuneration report continued
Quick view of remuneration in 2020
2020 outcomes
Element
Base Salary (annualised)
Annual bonus (% of Max)
LTIP (% of Max)*
Nick Roberts
Alan Williams
636,300
0%
n/a
517,650
0%
64%
* Combined vesting across the PSP and Co-Investment plans awarded in 2018, based on the performance period 2018-2020.
Annual bonus outcome for 2020
The maximum bonus opportunity for the CEO is 180% of salary and 150% of salary for the CFO. Half of bonus earned is deferred into shares
for three years. All bonus is subject to malus and clawback. Performance weighting and measures are unchanged from the previous year.
Adjusted operating profit
ROCE
Strategy
nil
nil
nil
Threshold
Target
Max
LTIP outcome for 2020
The maximum PSP award for Executive Directors is 150% of base salary. The maximum award under the Co-Investment Plan is 100% of base
salary subject to an Executive investing 50% of their net salary.
EPS growth
Aggregate cash flow
TSR
CROCE
nil
100
nil
100
Threshold
Target
Max
All bonus and LTIP outcomes are subject to malus and clawback. Performance weighting and measures are unchanged from the previous year.
Quick view of remuneration in 2021
Y1
Y2
Y3
Y4
Y5
75% vests after 3 years
Holding period
Underpins
25% vests after 5 years
Underpins
From 2021 we are proposing to replace our current long-term incentive plans with a Restricted Share Plan. The following graphic illustrates the
timelines of our new structure.
Measuring performance
Ambition
Strategic KPI
Bonus Weighting
LTIP Weighting
Profit growth
Turning profit into cash
Delivery against investments
Adjusted operating profit
Free cash flow
Return on capital employed (“ROCE”)
Strategic and operational objectives so that we continue to lay the
foundations to deliver future success
ESG measures and strong governance framework
Strategic delivery
Governance
Delivering value to shareholders Alignment to shareholder experience
50%
20%
–
20%
10%
–
–
–
underpin
–
underpin
100%
Share Ownership Guidelines
Executive Directors are required to hold shares valued at two times annual salary within five years of appointment. From 2021 they will also be
expected to maintain this level of shareholding (or their actual shareholding if lower) for a period of two years following stepping down from the Board.
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Travis Perkins plc Annual Report and Accounts 2020
Remuneration policy report
Other information
Policy report
The following sets out the Group’s Directors’ Remuneration Policy (the “Policy”). The Policy is subject to a binding shareholder vote at the
Annual General Meeting 27 April 2021 and, if approved by shareholders, will apply to payments made on and from this date. This Policy will
replace in full the Directors’ Remuneration Policy set out in the 2019 Annual Report, which was approved at the Annual General Meeting
held on 28 April 2020.
Remuneration philosophy
The principles of the Group’s remuneration policy, which were developed taking into account provision 40 of the UK Corporate Governance
Code, are:
• Remuneration arrangements are determined taking into account our Company culture, the 2018 Corporate Governance Code, wider
workforce remuneration and emerging best practice in relation to executive director remuneration.
• Remuneration should be clear and simple and support the execution of the strategy and long term decision making, contributing to the
delivery of short and long term superior sustainable financial returns for shareholders
• Remuneration should contain a performance related element. Bonus award levels are capped with payout linked to performance against a
limited number of measures which are well linked to our strategy, and stretching but fair targets are set. This ensures that potential reward
outcomes are clear and aligned with performance achieved, with the Committee having the discretion to adjust payouts where this is not
considered to be the case.
• Reward mechanisms should ensure that a significant proportion of variable pay is delivered in deferred shares ensuring that executives
retain a meaningful personal stake in the Group’s success
• Malus, clawback and discretion provisions, RSP holding periods and shareholding guidelines, including post-employment guidelines, should
be in place to create alignment with shareholders and to mitigate reputational and other risk
• Remuneration should be competitive and fair taking into account external market levels as well as internal practice to ensure pay remains
competitive while being equitable within the Company. The approach to basic salary increases should be consistent across all colleagues
• All colleagues should be able to share in the success of the Group through participation in both annual bonus schemes and longer term
share plans
• Finally, remuneration outcomes are reviewed in the context of the shareholder experience.
These principles apply across the Group. In addition to competitive base salary and bonus programmes, colleagues also have access to an
extensive range of benefits under the Group’s MyPerks colleague benefit programme. This includes a wide range of flexible and voluntary
benefits, retirement benefits, our all-colleague Sharesave Scheme and a range of recognition programmes.
Element
Link to strategy
Operation
Maximum potential value
Performance metrics
Remuneration Committee discretion
Base salary
Core element of total
package, essential to
support recruitment
and retention of high
calibre executives
None
Whilst there is no
maximum salary level
or maximum salary
increase, the increase for
Executive Directors will
normally be in line with
the general employee
increase
The Committee sets base
salary levels taking
into account:
• Role, experience and
individual performance
• Pay awards elsewhere in
the Group
• Salary levels at other
companies of a similar
size
• General economic
environment and
performance of the
business
Any salary increases are
normally effective from
1 January
The Committee retains
discretion to award salary
increases in excess of the
general population
where this is considered
appropriate to reflect
performance or significant
changes in market practice
or the size of the Company,
to recognise changes in
roles and responsibilities or
where a new Executive
Director has been appointed
to the Board at a lower than
typical market salary to
allow for growth in the role
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Remuneration policy report
Element
Link to strategy
Operation
Maximum potential value
Performance metrics
Remuneration Committee discretion
Benefits
Maintain a competitive
package with a range
of benefits for the
Director and their
family
Pension
Helps executives
provide for retirement
and aids retention
Directors are currently
entitled to
benefits including:
• Private medical insurance
• Income protection
• Annual leave
• Fully expensed company
car (or cash alternative)
• Life insurance of up to
five times salary
• All employee share plans
such as SAYE and BAYE
The Committee may
introduce other benefits if it
is considered appropriate to
do so
Executive Directors shall be
reimbursed for all
reasonable expenses and
the Company may settle
any tax incurred in relation
to these where appropriate
Our policy is that for new
Executive Directors up to
10% of salary is provided
either as a cash allowance
in lieu of pension or as a
contribution to a personal
pension plan (or a
combination of both)
Annual bonus
and Deferred
Share Bonus
Plan
Rewards achievement
of annual financial and
key business strategy
objectives. Rewards
personal performance
measured against key
objectives. Deferred
element encourages
longer term
shareholding and
aligns reward to
shareholder interests.
Malus & clawback
based forfeiture
provisions discourage
excessive risk taking
and short term outlook
ensuring that executive
and shareholder
interests are aligned
Total bonus level is
determined after the year
end, based on achievement
of targets
Normally up to 50% of the
total bonus is paid in cash.
The remainder of the bonus
is deferred as shares
for three years
Targets are set annually
in line with the
performance metrics
Dividend equivalents on
shares that are released
may be paid
Malus and clawback
provisions apply as
explained further in the
notes to this table
None
Benefit levels reflect
those typically available
to senior managers within
the Group and may be
subject to change. The
maximum potential value
being the cost to the
Company to provide
those benefits
The Committee may
remove benefits that
Executive Directors receive
or introduce other benefits if
it is considered appropriate
to do so taking into account
the circumstances
The CEO receives a
pension allowance of
10% of salary
The CFO’s pension
allowance was reduced to
20% and is capped at
£103,530 from 2020. It
will be reduced to 10% of
salary from 1 January
2023
Maximum bonus
opportunity under the
plan is 180% of annual
salary for the CEO and
180% of annual salary for
the CFO
None
None
Bonus measures
typically include:
• Financial targets
• Individual or group
targets pertaining to
delivery of the
business strategy
Financial targets will
account for at least
50% of the bonus
Performance below
threshold results in
zero bonus. Bonus
earned rises from 0%
to 100% of maximum
bonus opportunity for
levels of performance
between threshold and
maximum targets
Performance
measures and
weightings are set out
in the Statement of
Implementation of the
Remuneration Policy
The Committee retains the
discretion to review the
measures, the weighting of
measures and to set the
performance targets and
ranges for each measure
The Committee will
determine financial targets
and the amount of bonus
which can be earned for
achievement of the Group’s
plan. This determination will
be based upon an
assessment of the degree of
difficulty in achieving the
targets taking into account
market conditions,
improvement on prior year
performance required, and
other relevant factors
The Committee may in its
discretion, adjust annual
bonus payments, if it
considers that such level
would not reflect the
underlying performance of
the executive or the group or
the experience of
shareholders or other
stakeholders or if such level
would not be appropriate in
the circumstances
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Travis Perkins plc Annual Report and Accounts 2020
Element
Link to strategy
Operation
Maximum potential value
Performance metrics
Remuneration Committee discretion
Other information
Restricted
Share Plan
Aligns participants with
the shareholder
experience, whereby
participants build up a
shareholding in the
Company and are
incentivised to deliver
sustainable financial
performance and
enhance shareholder
value over
the longer term
Helps retain high
performing executives
Shareholding
requirements
Aligns the interests of
executives and
shareholders
Awards are normally
granted in the form of
restricted shares, annually
to participants
The maximum annual
award for all executive
directors is 125%
of salary
For Executive Directors
awards will normally vest
75% on the third
anniversary of the award
and 25% on the fifth
anniversary. The first
tranche will be subject to a
two year holding period so
that the total time horizon is
five years for the
entire awards
Dividend equivalents on
shares that are released
may be paid
Malus & clawback
provisions apply as
explained further in the
notes to this table
None
Formal requirements (not
voluntary guidelines) apply
to Directors and senior
executives. Participation in
long-term incentives may be
scaled back or withheld if the
requirements are not met
or maintained.
For the purposes of
assessing compliance with
the shareholding
requirement vested but
unexercised awards will
be considered
Awards will be subject
to performance
underpins measured
over the vesting
periods. If the
Company does not
meet one or more of
the underpins the
Committee would
consider whether it
was appropriate to
scale back the level of
payout under the
award to reflect this.
The Committee would
retain discretion to
determine what level
of scale back
was appropriate
The Committee retains
discretion to review the
performance underpins,
and to set the triggers for
each underpin
The Committee may in its
discretion, adjust the vesting
level of an award, if it
considers that the vesting
level would not reflect the
underlying performance of
the executive or the Group
or the experience of
shareholders or other
stakeholders or if such level
would not be appropriate in
the circumstances
The Committee retains
discretion to increase
shareholding requirements
Executive Directors are
expected to hold shares
valued at two times
salary within five years
of appointment to
the Board
Changes to policy
The key changes to this Policy compared to the previous policy are as follows:
• The introduction of a Restricted Share Plan replacing the former Performance Share Plan and Co-investment plan.
• The pension allowance for the CFO was reduced from 25% to 20% of salary from 1 January 2020 and frozen as a monetary amount of
£105,530 from that date. The pension allowance will be further reduced to the wider workforce rate of 10% of salary with effect from
1 January 2023
• Executive Directors who step down from the Board following the adoption of this policy will be expected to maintain a minimum
shareholding of two x base salary (or actual shareholding if lower) for a period of two years following stepping down from the Board.
• Other minor changes have been made to the wording of the Policy to aid operation and to increase clarity.
• Outstanding awards under the Performance Share Plan and Co-Investment Plan will vest in-line with the Remuneration Policy in force at the
time of grant.
Summary of decision making process
In determining the revisions to the Remuneration Policy the Committee followed a robust process which included discussions on the content of
the Policy at Remuneration Committee meetings during the year. The Committee considered the input from management and independent
advisors, as well as extensively consulting on best practice with major shareholders and proxy and advisory services.
Performance metrics
In considering appropriate performance metrics for the annual bonus the Committee seeks to incentivise and reinforce delivery of the
Company’s strategic objectives achieving a balance between delivering annual return to shareholders and ensuring sustainable long term
profitability and growth. Measures will therefore reflect a balance of direct shareholder value, as well as measures focused on meeting specific
strategic objectives aligned to long term growth.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Remuneration policy report continued
The Committee calibrates these targets by due reference to market practice, the Group’s strategic plan, general and bespoke market
intelligence, lead indicators and other indicators of the economic environment such that targets may represent relative as well as
absolute achievement.
Awards under the Restricted Share Plan are subject to performance underpins that act as safeguards to ensure that awards do not pay out if
vesting is not justified. For 2021, the underpins will be linked to ROCE and satisfactory governance performance. These underpins have been
selected as they are considered to reflect a good overall balance and safeguard the financial stability of the business whilst ensuring a continued
focus on governance.
Malus and clawback
Malus and clawback provisions are included in all incentives: the Annual Bonus (up to three years from date of award), and the Restricted Share
Plan (up to six years from the date of award). The circumstances in which malus and clawback could apply include:
• A material misstatement resulting in an adjustment to the Company’s audited consolidated accounts
• The determination of the number of shares subject to an award or the assessment of any performance condition was in error or based on
inaccurate or misleading information
• The Board determining in its reasonable opinion that any action or conduct of the participant amounts to serious misconduct, fraud or gross
misconduct or
• The Board determining that there has been a material failure of risk management (for 2020 bonus and incentive awards onwards)
• The Board determining that there has been serious reputational damage (for 2020 bonus and incentive awards onwards)
• The Board determining that there has been a material corporate failure (for 2020 bonus and incentive awards onwards) or
• Any other circumstances which the Board in its discretion considers to be appropriate.
Discretion
Areas where the Committee has discretion have been outlined in the Policy. The Committee may also exercise operational and administrative
discretions under relevant plan rules approved by shareholders as set out in those rules. A number of Committee discretions apply to awards
granted under each of the Company’s share plans, including that:
• Awards may be granted as conditional share awards or nil-cost options or in such other form that the Committee determines has the same
economic effect
• Awards may be settled in cash at the Committee’s discretion (for Executive Directors this provision will only be used in exceptional
circumstances such where for regulatory reasons it is not possible to settle awards in shares)
• Awards may be adjusted in the event of any variation of the Company’s share capital or any demerger, delisting, special dividend or other
event that may affect the Company’s share price.
In addition, the Committee has the discretion to amend the Policy with regard to minor or administrative matters where it would be, in the
opinion of the Committee, inappropriate to seek or await shareholder approval.
The Committee retains discretion to amend or substitute performance measures, targets and underpins and the weightings attached to
performance measures part-way through a performance year if one or more significant corporate events occur which causes the Committee to
believe that amended or substituted performance measures, weightings or targets would be more appropriate and not materially less difficult to
satisfy. Discretion may also be exercised in cases where the Committee believes that the outcome is not considered to be reflective of the
underlying financial or non-financial performance of the business or the performance of the individual. Any exercise of this discretion will
typically be discussed with shareholders in advance and explained in full.
The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions
available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the
payment were agreed (i) before the policy set out above came into effect, provided that the terms of the payment were consistent with any
applicable shareholder-approved Directors’ Remuneration Policy in force at the time they were agreed or where otherwise approved by
shareholders; or (ii) at a time when the relevant individual was not a Director of the Company (or other persons to whom the Policy set out above
applies) and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company or
such other person. For these purposes “payments” include the Committee satisfying awards of variable remuneration and, in relation to an
award over shares, the terms of the payment are “agreed” no later than the time the award is granted. This Policy applies equally to any
individual who is required to be treated as a Director under the applicable regulations.
100
Travis Perkins plc Annual Report and Accounts 2020
Other information
Illustration of the Application of the Remuneration Policy
Chief Executive Officer
Chief Financial Officer
)
m
£
(
n
o
i
t
a
r
e
n
u
m
e
R
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
£4.25m
19%
£3.06m
37%
£2.66m
30%
13%
26%
43%
37%
27%
27%
24%
17%
£2.09m
38%
27%
35%
£0.72m
100%
)
m
£
(
n
o
i
t
a
r
e
n
u
m
e
R
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
£3.52m
18%
£2.54m
27%
£2.22m
29%
42%
13%
25%
37%
29%
25%
£1.76m
37%
26%
37%
£0.64m
100%
37%
18%
Minimum
In line with
expectations
Maximum
Maximum
+ share price
growth
Maximum under
previous policy
+ share price growth
Minimum
In line with
expectations
Maximum
Maximum
+ share price
growth
Maximum under
previous policy
+ share price growth
Fixed remuneration Annual variable remuneration Long-term variable remuneration Share price growth
•
•
•
•
•
Fixed remuneration includes basic salary (from 1 January 2021), pension provision (from 1 January 2021) and other benefits (based on value disclosed in the single figure for 2020)
The “Minimum” scenario includes fixed remuneration only
The “In line with expectations” scenario includes fixed remuneration plus target annual bonus (50% of maximum) plus 100% vesting of the Restricted Share Plan (125% of salary)
The “Maximum” scenario includes fixed remuneration plus maximum bonus (180% of salary) plus 100% vesting of the Restricted Share Plan (125% of salary)
The “Maximum + share price growth” scenario is as per the “Maximum” scenario and assumes share price growth of 50%
Non-Executive Directors’ Fees
Fees for the Non-executive Chairman and Non-executive Directors are set at an appropriate level to recruit and retain Directors of a sufficient
calibre to guide and influence Board level decision making without paying more than is necessary to do so. Fees are set taking into account the
following factors:
• The time commitment required to fulfil the role
• Typical practice at other companies of a similar size and complexity to Travis Perkins
Non-executive fees will typically be reviewed annually with increases normally being effective from 1 July each year. Non-executive Director fees
policy is to pay:
• A basic fee for membership of the Board
• An additional fee for the Chair of a Committee and the Senior Independent Director to take into account the additional responsibilities and
time commitment of the role
Additional fees may be paid to reflect additional Board or Committee responsibilities as appropriate. The Non-executive Chairman receives an
all-inclusive fee for the role.
Current fees are detailed within the Statement of Implementation of the Remuneration Policy.
Non-executive Directors do not receive any other benefits (other than a staff discount card for purchasing products) and are not eligible to join a
company pension scheme. No compensation is payable on termination of office, which may be without notice from the Company. They cannot
participate in any of the Company’s share plans. The Company will pay reasonable expenses incurred by the Chairman and Non-executive
Directors (including any tax incurred in relation to these where appropriate).
Recruitment remuneration
It is the Group’s policy to recruit the best candidate possible for any executive Board position. It seeks to avoid paying more than is considered
necessary to secure the candidate and will have regard to guidelines and shareholder sentiment when formulating the remuneration package.
Generally the Group will set salary, incentives and benefits for candidates in line with the above remuneration policy and accordingly
participation in short and long term incentives will typically be on the same basis as existing directors. In all cases the Group commits to
providing shareholders with timely disclosure of the terms of any new executive hires including the approach taken to determine a fair level of
compensation. The maximum level of variable remuneration which may be awarded (excluding any “buyout” awards referred to below) in
respect of recruitment is 305% of salary, which is in line with the current maximum limit under the annual bonus and the Restricted Share Plan.
1.0
0.8
0.6
0.4
0.2
0.0
Travis Perkins plc Annual Report and Accounts 2020
101
Financial statementsGovernanceStrategic report
Remuneration policy report continued
The table below outlines the Group’s normal recruitment policy:
Base salary
and benefits
Pension
Annual bonus
The pay of any new recruit would be determined following the principles set out in the remuneration policy table
The appointee will be able to receive either a contribution to a personal pension scheme or cash allowance in lieu of pension
benefits in line with the Company’s policy as set out in the remuneration policy table
The appointee will be eligible to participate in the Annual Bonus and Deferred Share Bonus Plan as set out in the
remuneration policy table. Awards may be granted up to the maximum opportunity allowable in the remuneration policy
table at the Remuneration Committee’s discretion
Restricted Share
Plan
The appointee will be eligible to participate in the Company’s Restricted Share Plan as set out in the remuneration policy
table. Awards may be granted up to the maximum opportunity allowable under scheme rules at the Remuneration
Committee’s discretion
Share buy-outs
and replacement
awards
Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous employer as a result of
appointment, the Committee may offer compensatory payments or awards if after careful consideration it is determined that
it is appropriate to offer a buy-out. Any buy-out may be in such form as the Committee considers appropriate, taking into
account all relevant factors including the form of awards, expected value and vesting timeframe of forfeited opportunities.
When determining any such buy-out, the guiding principle would be that awards would generally be on a “like-for-like” basis
unless this is considered by the Committee not to be practical or appropriate
The incentive plan rules allow for awards to be made outside of the plan limit to facilitate the recruitment of an
Executive Director
To the extent that it was not possible or practical to provide the buyout within the terms of the Company’s existing incentive
plans, a bespoke arrangement may be used (including granting an award under the Listing Rule 9.4.2 which allows for the
granting of awards, to facilitate, in unusual circumstances, the recruitment of an Executive Director). Any buyout award made
under the Company’s Deferred Share Bonus Plan or Long-Term Incentive Plans will not count towards the individual’s
maximum opportunity under those plans
Relocation
Where the Group requires a candidate to relocate in order to take up an executive position it will normally reimburse the
reasonable costs of the relocation. This may include one-off or ongoing expenses such as schooling or housing for a
reasonable period of time
Where an internal candidate is promoted to an executive position the Group will honour any contractual commitments made through their
employment prior to the promotion including any accrued defined benefit pension provision. Future pension provision will be aligned with our
policy set out above.
Recruitment remuneration for Non-executive Directors would be assessed following the principles set out in the policy for Non-executive
Director fees.
Policy on payment for Directors leaving employment
Executive Directors’ contracts do not have a fixed expiry date but can be terminated by serving notice. Contractual notice periods for Directors
are normally set at six months’ notice from the director and 12 months’ notice from the Company and the Company would normally honour
contractual commitments in the event of the termination of a Director. Notwithstanding this approach it is Company policy to seek to minimise
liability in the event of any early termination of a Director.
The Group classifies terminations of employment arising from death, ill health, disability, injury, retirement with company agreement,
redundancy or the transfer from the Group of the employing entity as “good leaver” reasons. In addition the Committee retains discretion under
incentive plan rules to determine “good leaver” status in other circumstances. In the event such discretion is exercised a full explanation will be
provided to shareholders.
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Travis Perkins plc Annual Report and Accounts 2020
Leaver reason may impact treatment of the various remuneration elements as follows:
Remuneration Element Good Leaver Reason
Other Leaver Reason
Salary
Ceases on cessation of employment (salary may be paid in
lieu of notice) unless a pre-existing contractual term applies
Ceases on cessation of employment (salary may be paid in
lieu of notice) unless a pre-existing contractual term applies
Bonus including
Deferred Share
Bonus Plan*
Unpaid bonus from a completed performance period prior to
cessation will be paid in full. For the performance period in
which cessation occurs a pro-rata bonus may be paid, subject
to normal performance conditions
All unpaid bonus payments lapse. Any unvested deferred
bonus shares also lapse on leaving
Other information
Benefits
Restricted
Share Plan*
Any unvested deferred bonus share awards will normally
continue until the normal vesting date and vest in full. The
Committee may determine that awards should vest on
cessation of employment
Provision or accrual of benefits will cease on cessation
of employment or, if later, at the end of the relevant
subscription period
Provision or accrual of benefits will cease on cessation
of employment or, if later, at the end of the relevant
subscription period
Unvested awards lapse at cessation of employment
Where a participant ceases employment during any holding
period (other than for reason of gross misconduct) they will
continue to retain their award in full and it will be released
at the end of the holding period unless the Committee
determines that the award should be released at the time
of cessation
For awards in the form of options, participants will have six
months to exercise any vested awards
Unvested awards will normally vest at the normal vesting
date and remain subject to performance/underpins. Where a
participant ceases employment during the first three years of
the vesting period awards will be pro-rated based on time in
employment during this period unless the Committee
decides otherwise. Awards will normally remain subject to
any applicable holding period
The Committee may determine that awards should vest and
be released at cessation of employment taking into account
the extent to which underpins/performance targets have
been met and unless the Committee decides otherwise the
period of time elapsed since award
Where a participant ceases employment during any holding
period (other than for reason of gross misconduct) they will
continue to retain their award in full and it will be released at
the end of the holding period unless the Committee
determines that the award should be released at the time
of cessation
For awards in the form of options participants will have six
months from vesting or the end of any applicable holding to
exercise their award
*
Leaver vesting provisions are fully defined in the appropriate plan documents.
The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal
obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection
with the termination of a Director’s office or employment. In addition, the Company may pay any fees for outplacement assistance and/or the
Director’s legal or professional advice fees in connection with their cessation of office or employment. Where a Director was required to relocate
to take up their role then reasonable repatriation expenses may be included.
Post-employment shareholding
The Company has introduced a policy to support alignment with shareholder interests following an Executive Director stepping down from the
Board. Executive Directors who step down from the Board following the adoption of this Policy will normally be expected to maintain a minimum
shareholding of two x base salary (or actual shareholding if lower) for a period of two years after leaving the Board.
Non-executive Directors
The Chairman and Non-executive Directors’ appointment letters provide for no compensation or other benefits on their ceasing to be a Director.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Remuneration policy report continued
Change of control
In the event of a takeover or winding up of the Company, share awards may vest early. The Committee will determine the extent to which
awards shall vest taking into account the extent to which the performance conditions/underpins have been satisfied and unless the Committee
determines otherwise, the proportion of the performance period that has elapsed. Deferred share awards will normally vest in full. In the case of
a winding-up, demerger, delisting, special dividend or similar circumstances, awards may, at the Committee’s discretion, vest early on the same
basis as for a takeover.
Considering colleagues’ views
The Committee reviews information regarding the typical remuneration structure and reward levels for other UK based employees to provide
context when determining Executive Remuneration Policy.
The Company undertakes a regular engagement surveys for all Group employees to understand their views on working for Travis Perkins and
how this can be improved. Employee feedback on all matters of reward is provided as part of this survey, and through supplementary surveys
focussing on specific areas such as employee health and financial well-being. The Company established a Colleague Voice Panel in 2019 which
includes within its terms of reference the aim of listening to colleagues’ views when developing the Directors’ Remuneration Policy. Pete Redfern,
the designated Non-executive Director for engagement with the workforce pursuant to the UK Corporate Governance Code 2018 is the
Colleague Voice representative on the Board. He hosts a number of listening groups throughout the year and all relevant views are incorporated
into remuneration reviews. A significant portion of colleagues are shareholders meaning that they are also able to express their views in the
same way as other shareholders.
Considering shareholders’ views
The Committee believes that it is very important to maintain open dialogue with shareholders on remuneration matters. The Committee
regularly consults with significant shareholders regarding our approach to Executive remuneration and the views of shareholders are important
in determining any final changes. The Committee engaged extensively with shareholders regarding the changes proposed to the Policy and
were pleased with the level of engagement and support. The Committee intends to continue to consult with shareholders regarding any material
changes to remuneration arrangements.
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Travis Perkins plc Annual Report and Accounts 2020
Annual remuneration report
Other information
The following sets out the Group’s Annual Remuneration Report for 2020 which includes details of how its Policy was implemented in 2020
and how it intends to implement its Policy in 2021. This report is subject to an advisory shareholder vote at the 2021 Annual General Meeting.
Statement of Implementation of the Remuneration Policy in 2021
Executive Directors:
Individual maximum
opportunity in 2021
Measures and weighting
Operation
Plan
Base salary
(No change)
CEO - £636,300
(2020 - £636,300)
n/a
CFO - £517,650
(2020: £517,650)
Benefits
n/a
n/a
(No change)
Pension
(Alignment to
workforce)
CEO 10% of salary
in-line with the rate
available across the
wider workforce
n/a
CFO pension allowance
is £103,530 per
annum.
The Remuneration Committee reviewed
executive salaries and, taking into account
current market conditions, determined that there
would be no increases from 1 January 2021
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 five times salary and participation in
all-employee share plans operated such as
Sharesave (“SAYE”) and BAYE
Directors participate in a defined contribution
arrangement or receive a cash allowance
Taking into account the evolving views of our
shareholders in this area the Committee agreed
with the CFO that his pension will be reduced to
20% of salary from 1 January 2020. This
monetary amount of £103,530 has been frozen
at this fixed level so that it does not attract future
salary increases. From 1 January 2023 the CFO’s
pension will be reduced to the wider workforce
rate of 10%
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Annual remuneration report continued
Individual maximum
opportunity in 2021
Maximum annual bonus
opportunity:
CEO - 180% of salary
CFO - 180% of salary
Plan
Annual bonus
(Adjusted
measures and
alignment of
CEO and CFO)
Measures and weighting
Operation
The Committee has reviewed the performance
framework and has simplified the bonus
measures to focus on delivering short-term
priorities that support the delivery of our
long-term strategy
The 2021 bonus will be based on the following
measures:
• Adjusted operating profit: 50%
• Free cash flow: 20%
• Strategic performance: 30%
Targets are determined in relation to the Group’s
budget
Threshold payment is made for performance at
90% of the Group’s budget with maximum only
being made for performance well in excess of
the Group’s budget. Performance below
threshold results in zero bonus
50% of bonus earned is deferred as shares for
three years
For 2021 strategic performance will include:
Malus and clawback provisions apply
Strategic milestones:
Strategy as measured by market share,
Toolstation expansion, Group simplification and
IT modernisation.
ESG measures:
Continuous improvement in safety, carbon
reduction and increased numbers of
apprenticeships within the Group.
Adjusted operating profit has been chosen to
ensure that there is a continued focus on
driving revenue and managing costs to deliver
profit to shareholders. Likewise free cash flow
is a critical measure for the business to ensure
that we have the resources necessary to invest
in the business transformation to return value
to shareholders.
Successful deployment of our apprenticeship
programme is a lead indicator for progress and
against our diversity and inclusion programme.
We see ESG targets changing as targets are
achieved. During 2021 the foundation will be
set for ESG delivery in environmental areas
such as carbon footprint reduction and
environmental areas featuring in 2022 targets.
For 2021 the performance underpins are as
follows:
• ROCE above 9%. ROCE is one of the
business’s key KPIs assessing how
successful our investments have been in
returning value to shareholders. Return
measures have been a feature of our
incentive plans for a number of years
• Satisfactory governance performance
including no ESG issues that result in
significant reputational damage to
the Company
Restricted Share
Plan
Maximum annual award
of 125% of base salary
(Simplification,
single plan
replacing
dual plan
arrangement)
On the third anniversary of grant 75% of the
award vests, subject to an additional holding
period of a further two years. The final 25% of
the award vests on the fifth anniversary of award
Malus and clawback provisions apply
Shareholding guidelines including post-employment apply to Executive Directors as set out on pages 93 and 95.
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.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
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 Stuart Chambers’ assistant
• 25% of Non-executive Director and Chairman fees were 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
• The review date for Non-executive Directors’ fees is 1 July. Fees were last reviewed with effect from 1 July 2020 and the
basic fee was increased to £60,000 and the fee for the Chair of the Stay Safe Committee was increased to £12,000. No
other increases were made to Non-executive Directors’ fees.
They are next due to be reviewed with effect from 1 July 2021. The current fees are as follows:
• 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.
• Non-executive basic fee - £60,000*
• Chairs of Audit and Remuneration Committees - £17,000
• Senior Independent Director - £12,500
• Chair of Stay Safe Committee - £12,000
*
The Non-executive basic fee was increased from £58,661 to £60,000 with effect from 1 July 2020. Due to an oversight an increase from £57,511 to £58,661 with effect from
1 July 2019 was not shown in the 2019 Directors’ Remuneration Report.
Remuneration elsewhere in the Group
2020 was an exceptionally challenging year for our colleagues as they sought to balance family and work commitments through the
Covid-19 pandemic. The Group has attempted to support colleagues through these difficult times with short, medium and long term
measures. We supported colleagues on furlough by maintaining pay at full rates initially, a period at 90% and then for sustained furlough at
the government 80% rate. Whilst we have generally been unable to pay bonuses for 2020, we supported colleagues working from home
with an allowance to purchase office essentials, and a thank you payment was made in December to colleagues below management
recognising their tremendous efforts.
Our colleague well-being programmes are well established, but we increased our communication of these programmes alongside our colleague
“check-ins” to ensure colleagues could access the necessary advice, support and guidance they needed.
We did not apply a general salary increase on 1 January 2021 but instead invested in our lower paid colleagues, making significant progress
towards our aspiration to be a Real Living Wage employer. At the same time we also took the opportunity to enhance our family leave policies.
As part of our financial well-being programme we continue to actively encourage saving whether this be for retirement (we have held a number
of very well attended webinars on different aspects of retirement planning and pension provision) and for more short-term savings goals where
we see the popularity of our Sharesave Scheme continue (over 25% of employees participate in Sharesave of which over 75% are colleagues
rather than managers).
The Restricted Share Plan outlined earlier in this report will also replace Performance Share Plan participation at other levels of management.
We believe this is a very positive step, much more closely aligning managers to the shareholder experience and giving a strong feeling of
ownership and accountability.
All colleagues are eligible for a performance bonus, however we are also simplifying our approach to support our strategy and to encourage and
reward collaboration.
Travis Perkins plc Annual Report and Accounts 2020
107
Financial statementsGovernanceStrategic report Annual remuneration report continued
Audited information £000
Single total figure of remuneration
£’000
Executive Directors
Nick Roberts
Alan Williams
Non-executive Directors
Ruth Anderson3
Stuart Chambers
Coline McConville
Pete Redfern
Chris Rogers4
John Rogers
Marianne Culver
Blair Illingworth
Total
£’000
Executive Directors
Nick Roberts5
Alan Williams
Non-executive Directors
Ruth Anderson
Stuart Chambers
Coline McConville
Pete Redfern
Chris Rogers6
John Rogers
Marianne Culver
Blair Illingworth
Total
Salary
Benefits
Pension
605
492
13
301
73
75
61
70
56
56
1,802
27
20
–
–
–
–
–
–
–
–
48
64
104
–
–
–
–
–
–
–
–
168
Salary
Benefits
Pension
Total
fixed
696
616
13
301
73
75
61
70
56
56
2,018
Total
fixed
2020
Bonus
LTI1
Buy-out
Total
variable
Total
–
–
–
–
–
–
–
–
–
–
–
–
824
–
–
–
–
–
–
–
–
824
–
–
–
–
–
–
–
–
–
–
–
–
824
696
1,440
–
–
–
–
–
–
–
–
13
301
73
75
61
70
56
56
824 2,842
2019
Bonus
LTI2
Buy-out
Total
variable
Total
315
510
75
320
75
68
70
58
10
10
1,511
13
21
–
–
–
–
–
–
–
–
34
32
128
360
659
–
–
–
–
–
–
–
–
75
320
75
68
70
58
10
10
160 1,705
503
678
–
–
–
–
–
–
–
–
1,181
–
570
–
–
–
–
–
–
–
–
570
560 1,063
1,248
–
1,423
1,907
–
–
–
–
–
–
–
–
560
–
–
–
–
–
–
–
–
2,311
75
320
75
68
70
58
10
10
4,016
Notes:
1.
LTI reported for 2020 for Alan Williams include LTI awards vesting in March 2021. The value of these awards has been calculated based on the average share price for the last
quarter of 2020 of £12.14 . For co-investment plan awards, the share price on the date of grant of 29 March 2018 was £12.37. For PSP awards, the share price on the date of grant of
13 March 2018 was £13.00. The share price used to value the LTIP for single figure purpose of £12.14 represents no increase and the proportion of the 2018 LTIP value disclosed in
the single figure attributable to share price growth was therefore nil. The Remuneration Committee did not exercise discretion in respect of the share price appreciation.
2. LTI reported for 2019 Alan Williams (£913k) were calculated on an estimated basis using the average share price of the final quarter of 2019 of £14.82. They are restated here to
reflect the actual share prices on vesting (PSP £10.50 and Co-investment Plan £8.65 giving a revised figure of £569,931. For co-investment plan awards, the share price on the
date of grant was £15.18. For PSP awards, the share price on the date of grant was £14.88. The share price used to value the co-investment plan awards and PSP awards for single
figure purpose represents no increase and the proportion of the 2017 LTIP value Alan Williams was therefore nil.The Remuneration Committee did not exercise discretion in respect
of the share price appreciation.
In March 2020 Chris Rogers received a payment of £40,000 in respect of services provided in relation to the demerger of the Wickes business.
3. Ruth Anderson stepped down from the board on 3 March 2021.
4.
5. Nick Roberts was appointed as a Director of Travis Perkins and CEO designate on 1 July 2019 and appointed CEO on 5 August 2019.
6.
In December 2019 Chris Rogers received a payment of £40,000 in respect of services provided in relation to the demerger of the Wickes business.
Explaining the single figure table
Salary
All Board and Group Leadership Team members took a 20% pay reduction for three months during 2021.
Benefits
Benefits for 2020 for Nick Roberts and Alan Williams include private medical insurance and the provision of a company car and fuel
(or allowance alternative).
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Travis Perkins plc Annual Report and Accounts 2020
Annual bonus for 2020
Annual bonuses for 2020 were subject to adjusted operating profit (60%), ROCE (20%) and performance against our strategic tracker (20%).
2020 was a very challenging year for the Group. Despite the unique challenges facing the Company the Executives performed strongly,
adapting the business to manage through periods of lockdown whilst keeping our colleagues, customers and suppliers safe. However financial
performance was significantly impacted by the pandemic and as a result outturns for the adjusted operating profit and ROCE measures were
below the thresholds set. Although the Executives made strong progress against the Strategic Tracker the Committee and management
determined that it would not be appropriate to award an annual bonus for 2020.
The following table summarises the bonus targets and achievement for 2020:
Other information
Performance
measure
Adjusted
operating profit
ROCE
Business
strategy
Weighting
60%
20%
Targets
Threshold
(0%)
£396m
9.0%
Plan
(50% bonus)
Maximum (100%
bonus)
Actual
performance
Pay-out (as a % of
maximum)
£417m
9.5%
£438m
10.0%
£227m
5.5%
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 below. The Committee
exercised discretion and elected that no bonus should be paid against business strategy
achievement.
20%
0%
0%
0%
Total
£823,576
Long Term Incentive Plans (“LTIP”)
The long-term incentive figure in the single figure is made up of the following plans:
Performance Share Plan
£300,634
Co-Investment Plan
£522,942
Alan Williams
(24,764 shares including 4,223 dividend
equivalents added in the vesting period)
(43,076 shares including 2938 dividend
equivalents added in the vesting period)
The value of shares vesting has been calculated with reference to the average price over the last quarter of 2020 of £12.14
Measure
Safety
People
Simplification of the Group
Business Strategy
Summary of Performance
Committee’s Assessment
Targeted improvements in relation to accident
severity rate were achieved, performance against
accident frequency rate was marginally short
of target.
Colleague engagement rates were within the target
range. The committee noted the considerable
additional initiatives deployed to engage with
colleagues during the pandemic to support
colleague well-being and safety.
Significant work was undertaken to ready the
Wickes business for demerger in Q1 2020,
although this was ultimately postponed due to the
Covid pandemic. Significant activities to manage
the above branch costs and to re-size the Group
centre were completed fully.
Successful delivery of strategic initiatives relating
to pricing, ranging, service and network in the TP
general merchant business. Successful delivery of
expansion plans in Toolstation UK and Europe.
Partially achieved
Achieved
Partially achieved
Achieved
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report
Annual remuneration report continued
Performance Share Plan
The following table sets out the performance targets, achievements and vesting levels for the Performance Share Award granted in 2018 and
vesting in 2021 in respect of performance period ending on 31 December 2020:
Measure
Adjusted EPS Growth
Relative TSR
Aggregate cash flow
Total vesting
Weighting
Threshold
Maximum
40%
20%
40%
3%pa
10% pa
Median Upper quartile
£1,053m
£953m
Actual
(27.5)%
39%
£1,112m
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 2018 and vesting in
2021 in respect of performance period ending on 31 December 2020:
Measure
Cash Return on Capital Employed (three year average)
Weighting
100%
Threshold
9.7%
Maximum
10.7%
Actual
12.0%
Total vesting
Vesting
100%
100%
When considering the level of annual bonus payout and long-term incentive vesting, the Committee also considered the underlying
performance of the Group over the performance period, taking into account performance against key financial and non-financial indicators as
well as the share price performance and the experience of shareholders and other stakeholders. The Committee also considered whether there
had been a significant negative event (such as an ESG event) which would warrant an adjustment. The Committee concluded the proposed
pay-out outcomes detailed above to be appropriate.
Overall, the Committee considers that the Remuneration Policy has operated as it intended during 2020.
Payments to past Directors
No payments were made to past Directors and no payments were made to any Director for loss of office in the year.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Director’s pension entitlements
In lieu of pension contribution, a gross cash allowance of £103,500 was paid to Alan Williams. Nick Roberts receives 10% 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
Nick Roberts
£’000
5,497
58,133
63,630
Alan Williams
£’000
n/a
103,530
103.530
Share interests awarded during the financial year
The Remuneration Committee originally intended to grant awards under the PSP and CIP in late March 2020 in-line with the normal timetable.
However, given the market uncertainty that resulted following the Covid-19 outbreak, the Committee decided to defer grants until market
conditions stabilised somewhat. Awards were granted on 22 September 2020 and, following a review, the Committee decided to amend only
the cash element of the various performance targets originally disclosed in the 2020 Directors Remuneration Report as follows:
•
Incorporate Wickes Performance – Following our announcement that the demerger of Wickes has been paused the Committee considered
that it was appropriate for the targets to be revised to incorporate the Wickes business within the target set
• Reflect revised market expectations of performance – Since the targets were originally set market expectations of performance changed
significantly. The Committee therefore considered that it would be appropriate to reflect these revised expectations in the cash targets to
ensure that they remain stretching while being motivational for management
There were no changes to the EPS or TSR targets disclosed in the 2020 DRR.
Impact of Wickes
In setting the performance targets for the schemes as laid out in the 2020 DRR, the Committee excluded the performance of the Wickes
business on the basis that it was anticipated that the demerger of Wickes would complete during Q2 and so would no longer form part of the
Travis Perkins Group. On 20 March 2020, the Group issued a Covid-19 update in which it announced that the demerger would be paused in
order to focus management fully on the challenges of managing through the pandemic. Therefore the impact of Wickes has been
reincorporated in the targets for both the 2020 PSP and CIP awards.
Impact of Covid-19
When reviewing the targets the Board noted the potential negative impact of the pandemic on the financial performance of Travis Perkins.
Long-term incentives are a key component of motivating and retaining senior management across the Group and are of particular importance
as the management team leads a successful response to the demands of Covid-19. Therefore the Committee decided to revise the cash targets
so that they were stretching but achievable, reinforcing a strong focus on cash and liquidity.
Prior to granting the awards the Committee consulted with our major shareholders outlining the proposed changes to the cash targets and the
rationale as set out above. Shareholders were generally supportive of the changes.
Award size
Before granting awards the Committee took into account shareholder guidance that where the share price has fallen significantly compared to
prior years awards should be scaled back. The Committee considered that the share price at grant was broadly comparable to prior years and
therefore thought that it was appropriate to continue to grant at the normal levels. In-line with best practice the Committee retains discretion to
adjust the vesting outturns if they are not considered to be reflective of the underlying financial or non-financial performance of the business or
the individual over the performance period or where the outcome is not considered appropriate in the context of the experience of shareholders
and other stakeholders.
Performance Share Plan
Date of award
Type of award
Basis
Vesting at
lower
target (%) Face value*
Performance period
Nick Roberts
Alan Williams**
14 September
2020
Performance
Shares - nil
cost option
150% of
Salary
25%
954,445
83,467 shares at £11.435/share)
1 January 2020 to 31 December
2022
776,471
(67,903 shares at £11.435/share)
Awards are subject to an additional
two year holding period post vesting
* Awards are increased at each dividend payment date to reflect the dividends that would have been paid on vested shares between grant and vesting.
** On the same date, Alan Williams was also awarded 2,623 market value options under the HMRC tax-advantaged CSOP element of the PSP with a face value of £29,994 and an
exercise price of £11.435 (the market value on the day prior to the award). This award is subject to the same performance conditions as the PSP award. If the options vest they are
exercisable until the tenth anniversary of grant.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Annual remuneration report continued
Performance Share Plan awards are subject to the following performance measures:
Measure
Weighting
Target range
Vesting range
Adjusted EPS Growth
40%
Lower target - 3% per annum over the vesting period
Maximum target - 10% per annum over the vesting period
Aggregate Cash Flow over
the performance period
40%
Lower target £885m
Maximum target £965m
Company TSR Relative to
FTSE 50-150 Index
20%
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
Co-Investment Plan
Nick Roberts
Alan Williams
Date of award
Type of award
Basis
22 September
2020
Matching
Shares - nil
cost option
Up to 2:1
matching of
shares
purchased
Vesting at
lower target
(%)
25%
Face value*
Performance period
627,370
(60,214 shares at £10.419/share)
513,250
(49,261 shares at £10.419/share)
1 January 2020 to
31 December 2022
Awards are subject to an
additional two year holding
period post vesting
*
Awards are increased at each dividend payment date to reflect the dividends that would have been paid on vested shares between grant and vesting.
Co-Investment Plan matching awards are subject to the following performance measure, which has been set taking into account the impact of
IFRS 16 – Leases:
Measure
Cash Return on Capital Employed
(“CROCE”)
Weighting
100%
Target detail
Lower target 6.5%
Maximum target 7.5%
Matching range
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 2020
Half of the bonus earned in respect of 2019 performance was awarded as deferred shares as follows:
Nick Roberts
Alan Williams
Date of award
14 September 2020
14 September 2020
Face value
Number of shares**
Share price *
251,317
339,086
15,886
21,434
15.82
15.82
* The share price used to calculate the number of shares awarded was the last 30 days of the Company’s 2019 financial year.
** Shares vest three years from the date of award. Awards are increased at each dividend payment date to reflect the dividends that would have been paid on vested shares between
grant and vesting.
No deferred shares will be issued in respect of 2020 bonus as no bonus was awarded.
Directors’ shareholding 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 five years of appointment. As at 31 December 2020 Nick Roberts’ shareholding was 0.60
times salary and Alan Williams’ was 4.89 times salary based on the average share price for the last quarter of 2020 £12.14.
Directors’ shareholdings and share interests as at 31 December 2020 :
Executive Director
Beneficial owner
Conditional shares
granted under LTI
plans1
Unconditional shares
granted under LTI
plans2
Nick Roberts
Alan Williams
29,268
205,296
307,911
316,108
28,346
54,969
Unvested options
subject to
performance
conditions3
2,489
2,623
Vested but
unexercised options
4,066
0
Interests qualifying
towards shareholder
requirement4
31,422
205,296
Total interests
372,080
578,996
1.
2.
Includes unapproved Performance Share Plan awards, Co-Investment Plan awards and buyout awards which are subject to performance conditions.
Includes awards made under Deferred Share Bonus Plan (which are not subject to further performance conditions), 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 the corresponding PSP
4.
award.
Interests qualifying towards shareholding requirement comprise ordinary shares beneficially held at 31 December 2020 by the executive and their spouse/partner, vested but
unexercised SAYE options and the post tax value (53%) of any share options or awards which have vested but have not been exercised.
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Travis Perkins plc Annual Report and Accounts 2020
There were no changes in Executive Directors’ share ownership between 31 December 2020 and 1 March 2021.
During 2020 the following awards were exercised:
Other information
Nick Roberts
Performance Share Plan
Deferred Share Bonus Plan
Co-Investment Plan
Sharesave
Buyout award
Alan Williams
Performance Share Plan
Performance Share Plan
Deferred Share Bonus Plan
Co-Investment Plan
Sharesave
Buyout award
Directors’ shareholding and share interests - Non-executive Directors
Non-Executive Director
Stuart Chambers
Marianne Culver
Blair Illingworth
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Exercise date
Number of shares
Price per share
n/a
n/a
n/a
n/a
n/a
0
0
0
0
0
n/a
n/a
n/a
n/a
n/a
Exercise date
Number of shares
Price per share
14 September 2020
14 September 2020
n/a
14 September 2020
2 December 2020
n/a
927
24,561
0
36,097
1,518
0
11.4350
11.3971
n/a
11.3971
11.8500
n/a
Beneficial
shareholding
(as at 31 December
2020)
Beneficial
shareholding
(as at 26 February
2021)
10,313
589
717
4,163
10,934
9,088
3,349
10,824
679
913
4,298
11,028
9,181
3,472
A minimum of 25% of Non-executive Director fees is paid in shares. Between 31 December 2020 and 26 February 2021 Non-executive
Directors’ share ownership increased due to the payment of a portion of their fees in shares.
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 six months notice from the Directors and 12 months notice from the Company. They do not
specify any particular level of compensation in the event of termination or change of control. Details of the Group’s policy on payments in
respect of loss of office are provided in the Group’s Directors’ Remuneration Policy.
The dates Executive Directors’ service contracts were entered into are as follows:
• Nick Roberts - 1 July 2019
• 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
Coline McConville
Pete Redfern
Christopher Rogers
John Rogers
Stuart Chambers
Marianne Culver
Blair Illingworth
Expiry of appointment letter
February 2024
November 2022
September 2022
November 2023
September 2026
November 2028
November 2028
In accordance with best practice, the Non-executive Directors stand for re-election annually.
No compensation is payable on termination of the employment of Non-executive Directors, which may be with or without notice.
Travis Perkins plc Annual Report and Accounts 2020
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Financial statementsGovernanceStrategic report Annual remuneration report continued
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 one Non-executive Directorship or other significant appointment,
provided that these appointments will not lead to conflicts of interest, and they may retain the fees received. Nick Roberts is a Director and
Trustee of the Forces in Mind Trust. Nick receives no fee for this appointment. Alan Williams held no external appointments during 2020.
Funding of equity awards
Both executive incentive arrangements and entitlements under the HMRC approved all colleague Sharesave scheme are satisfied by shares
purchased in the market. Shares purchased in the market are held by a trust and the voting rights relating to the shares are exercisable by the
Trustees in accordance with their fiduciary duties. At 31 December 2020 the Trust held 2,662,660 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.
220
200
180
160
140
120
100
80
60
40
20
0
Jan 11
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
TSR is rebased to 100 from 1 January 2011
Total shareholder return
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 (% of maximum)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1,938 3,506 2,044 2,634 2,360 2,575 2,532 2,258 2,622
35% 89%
32%
76%
63% 89%
–
–
–
–
45%
97%
0% 44.2%
696
0%
-
–
54% 40% 40%
46% 40%
97% 100% 100% 100% 100%
27%
–
0% 80%
51% 100%
–
37%
0%
72%
–
24%
–
Data for 2019 relates to both Nick Roberts and John Carter reflecting their tenure in the role of CEO during 2019. 2014-2018 relates to John
Carter, earlier data relates to the previous CEO, Geoff Cooper.
CEO to all employee pay ratio
The following table provides pay ratio data in respect of the CEO’s total remuneration compared to the 25th, median and 75th percentile
employee.
Financial Year
Method
2019
2020
Option A
Option A
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
133
37
109
30
81
23
The employees used for the purposes of the table above were identified on a full-time equivalent basis as at 31 December 2020. Option A was
chosen as it is considered to be the most accurate way of identifying the relevant employees.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Employee pay includes salary, allowances, overtime, bonus, commission, benefits and share plan proceeds. For the purpose of the calculation
employee pay has been standardised to the equivalent of a 40-hour working week and where employees have started mid-period the
employee’s pay has been restated on a full year basis to ensure a like-for like comparison.
The following table provides salary and total remuneration information in respect of the employees at each quartile:
Financial Year
Element of pay
2020
Salary
Total remuneration
25th percentile
employee
18,138
19,019
Median
employee
20,342
23,097
75th percentile
employee
25,661
30,166
The Board has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and progression.
There is a significant reduction in the CEO pay ratio in 2020 compared to 2019. This is mainly attributable to no bonus being earned by the
CEO in 2020, and that due to tenure no LTIP vesting is included in the CEO’s 2020 earnings.
There are no changes attributable to changes in the Company’s employment model nor in the methodology used to calculate the ratio.
Change in remuneration of Directors
Comparative employee group1
Executive Directors
CEO
CFO
Ruth Anderson3
Stuart Chambers
Coline McConville
Pete Redfern
Chris Rogers
John Rogers
Marianne Culver4
Blair Illingworth4
Percentage change in salary/fee
earned (2020 full year
compared to 2019 full year)
Percentage change in bonus opportunity
earned (2020 full year forecast
compared to 2019 full year)
Percentage change in taxable benefits
received (2020/21 tax year
compared to 2019/20 tax year)2
1.7%
0%
0%
n/a
-5.0%
-2.0%
11.4%
-12.9%
22.0%
n/a
n/a
-38%
-98%
-98%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
8.4%
0%
-5%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. The comparator group is all colleagues within the Trade Merchant businesses and central functions. The Company is a non-employing entity and so is not used for comparative
purposes.
2. Based on a matched sample across the two periods.
3. Ruth Anderson stepped down part way through 2020.
4. Marianne Culver and Blair Illingworth were appointed in November 2019.
Relative importance of spend on pay
m
£
n
i
t
n
u
o
m
A
900
800
700
600
500
400
300
200
100
0
823
781
+5.4%
116
-100%
0
143
133
-7.0%
Distribution to
Shareholders
Capex
53
45
Corporation
Tax
-18.2%
Employee
Remuneration
2020
2019
Capital expenditure is shown, for comparison, as an indicator of investment by the Company in future growth. It includes funds invested in the
purchase of property, plant and equipment. Corporation tax is included as an indicator of wider societal contribution facilitated by the
Company’s operations and is the actual amount of corporation tax paid in the relevant reporting periods.
Travis Perkins plc Annual Report and Accounts 2020
115
Financial statementsGovernanceStrategic report
Annual remuneration report continued
Governance
During the year the Committee comprised Coline McConville (Chair), Peter Redfern, Christopher Rogers and Marianne Culver, all of whom
are independent Non-executive Directors, and Stuart Chambers, Chairman of the Board, who was independent on appointment.
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.
Fees are charged on a time and materials basis. During the year Deloitte was paid £53,200 for advice provided to the Committee.
In addition Nick Roberts (CEO), Alan Williams (CFO), Robin Miller (Company Secretary), Emma Rose (Group Human Resources Director), Jon
Erb (Director of Group Finance) and Paul Nelson (Reward Director) have assisted the Committee in its work and attended Committee meetings
where appropriate. No individual is involved in the setting of their own remuneration.
Responsibilities
The Remuneration Committee is responsible for developing and implementing the remuneration policy within the Company. It determines and
agrees with the Board the policy for the remuneration and benefits of the Chairman of the Company, Executive Directors and executive
committee members and 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.
Key items discussed in 2020 meetings
In 2020 the Remuneration Committee formally met five times, with additional conference calls or meetings as required. The Committee
discussed amongst others the following matters:
Month
Key Issues Considered
February
June
• Review of 2019 performance against targets and determining annual and long-term incentive outcomes
• Annual bonus and LTIP targets for 2020
• Review of the impact of the Wickes transaction on incentive arrangements
• 2019 Directors’ Remuneration Report
• Committee governance
Impact of Covid-19 on 2020 remuneration
•
• 2020 share grants
• Sharesave 2020
• Review of Directors’ Remuneration Policy
September
• Review of Directors’ Remuneration Policy
November
December
• Review of Directors’ Remuneration Policy
• Approach to shareholder consultation
Initial review of performance targets for 2020 annual bonus and 2018 long-term incentive awards
• Salary review 2021
•
• Proposed Remuneration Policy changes
• Review of shareholder feedback
• Governance update
Shareholder Voting
The following resolutions in relation to remuneration were put by the Company’s Annual General Meeting (2019 Directors’ Remuneration Report
and 2019 Policy):
Resolution
Votes For
% For
Votes Against
% Against Votes Withheld
To receive and approve the Directors’ Remuneration Report (2020 AGM)
To receive and approach the Directors’ Remuneration Policy (2020 AGM)
157,918,948
144,173,350
91.66% 14,370,396
83.24% 29,029,872
8.34%
16.76%
915,371
1,493
The Director’s Remuneration Report has been approved by the Board of Directors and is signed on its behalf by:
Coline McConville
Chair of the Remuneration Committee
1 March 2021
116
Travis Perkins plc Annual Report and Accounts 2020
Directors’ report
For the year ended 31 December 2020
The Directors present their annual report and audited accounts for the
year ended 31 December 2020. The Corporate Governance report on
pages 79 and 83 forms part of the Directors’ Report.
Business review
A review of the Group’s position, developments, activities in the field
of research and development and a review of the key events affecting
the Group in the last financial year can be found on pages 28 to 43.
Whilst the Group operates predominantly in the UK, it has a small
number of branches in the Isle of Man and the Republic of Ireland; and
continued development of the Toolstation Europe business now
reaching 83 branches in Belgium, France and Holland.
Information to be disclosed under LR 9.8.4R
Listing rule
Detail
Page reference
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
109
162
162
Articles of Association
The Company’s Articles of Association may only be amended by
special resolution at a general meeting of the Shareholders. The
Company has determined that all Directors should seek election or
re-election at the Annual General Meeting. The Articles of Association
of the Company further regulate the appointment and removal of
directors, in addition to the Companies Act 2006 and related
legislation. The powers and responsibilities of the Directors are
described in the Corporate Governance report on pages 76 to 83.
Board of Directors
The names of the Directors at 31 December 2020 together with their
biographical details are set out on pages 76 to 77. With the exception
of Ruth Anderson who stepped down from the Board on 3 March
2020 all Directors held office throughout the year. The Executive
Directors have rolling 12 month notice periods in their contracts. The
Non-executive Directors do not have service contracts. In light of the
outcome of the evaluation of the Board’s effectiveness set out on
page 82 and due to the skills and experience that each Director brings
to their role, the Board concluded that each Director’s contribution is
and continues to be, important to the Company’s long-term
sustainable success.
Other information
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 2020 including holdings, if any, of spouses and of
children under the age of 18 are contained in the Directors’
Remuneration Report on pages 93 to 95.
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 remain in force in the year ended
31 December 2020.
Greenhouse gas emissions reporting
Details of the Group’s greenhouse gas emissions reporting can be
found in the Sustainability report on pages 58 to 59.
Results and dividends
The Group results for the year ended 31 December 2020 are set out
in the income statement on pages 131. No interim dividend was paid in
2020 and no final dividend has been proposed by the Directors.
Balance sheet and post balance sheet events
The balance sheet on page 132 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 is set out in
the Strategic Report which can be found on pages 44 to 51.
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 40 to 43. Specific quantitative
information on borrowings and financial instruments is given in
notes 22 and 27 on pages 163 to 164 and pages 167 to 170 of the
financial statements.
Director’s conflict of interest
During the year, no Director had any material interest in any contract
of significance to the Group’s business. The Company has undertaken
to comply with best practice on approval of Directors’ conflicts of
interest in accordance with the Company’s Articles of Association.
Substantial shareholding
As at 31 December 2020, 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.
Ninety One UK Limited
Investec Asset Management
Harris Associates L.P.
OppenheimerFunds, Inc.
Sanderson Asset Management LLP
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Not disclosed
12,480,008
12,741,837
12,398,948
12,381,080
12,321,382
Less than 5%
4.95
5.05
4.92
4.91
4.89
Between 31 December 2020 and 1 March 2021 no notifications were received by the Company.
Travis Perkins plc Annual Report and Accounts 2020
117
Financial statementsGovernanceStrategic report Directors’ report continued
For the year ended 31 December 2020
Close Company Status
The close company provisions of the Income and Corporate Taxes
Act 1988 do not apply to the Company.
Employees
Statements on employee matters are contained in the Sustainability
section of the Annual Report on pages 60 to 65.
Details of the number of employees and related costs can be found in
note 32 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 is set out in the Nominations Committee report on pages
84 to 86 and in the Sustainability section of the Annual Report on
pages 64 to 65.
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,
marital status, pregnancy, gender reassignment, 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 communications. There are various
channels utilised across the Group and these include listening groups;
colleague forums; workshops; conferences; internal newsletters and
newspapers; and online communities. Employee representatives are
consulted regularly on a wide range of matters affecting their interests
through various channels including colleague forums. To achieve a
common awareness of the financial and economic factors affecting the
performance of the Group, employees are briefed on the Group’s
financial performance and strategy. This is carried out through emails,
webcasts and personal briefings which take place during half year and
full year results announcements. 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 94.
Modern slavery
The Group recognises the harmful impact that Modern Slavery and
human trafficking has on society and is committed to ensuring its
business and supply chain is free from this criminal activity. The
Group produces a slavery and human trafficking statement each
financial year. The latest statement can be found on the Group’s
corporate website www.travisperkins.co.uk.
Political donations
The Group’s policy is not to make 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, appointed in 2015, is the Company’s auditor at the date of
this report. 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 set the auditor’s remuneration.
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 2020 the Company had an allotted and fully paid
share capital of 252,143,923 ordinary shares of 10 pence each, with
an aggregate nominal value of 25,214,392 (including shares owned by
the Travis Perkins Employee Share Ownership Trust). The ordinary
shares are listed on the London Stock Exchange and all 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 of the
financial statements.
As at 31 December 2020 the Travis Perkins Employee Share
Ownership Trust owned 2,662,660 shares in the Company 1.1% of
the issued share capital) for use in connection with the Company’s
share schemes. Any voting or other similar decisions relating to those
shares would be taken by the trustees, who may take account of any
recommendation of the Company.
There are no restrictions on voting rights attaching to the Company’s
ordinary shares. The Company is not aware of any agreements
between holders of securities that may result in restrictions on the
transfer of securities or on voting rights.
The rules governing the appointment and replacement of Board
members and changes to the Articles of Association accord with
usual English company law provisions. The powers of the Company’s
Directors are set out in the Company’s Articles of Association. In
particular, the Board has the power to issue shares and to purchase
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 any 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:
Robin Miller
General Counsel & Company Secretary
1 March 2021
118
Travis Perkins plc Annual Report and Accounts 2020
Statement of Directors’ responsibilities
For the year ended 31 December 2020
Other information
The Directors are responsible for preparing the Annual Report and the
Group and parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in
accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 and applicable law and
have elected to prepare the parent Company financial statements in
accordance with UK accounting standards, including FRS 101 Reduced
Disclosure Framework. In addition the Group financial statements are
required under the UK Disclosure and Transparency Rules to be
prepared in accordance with International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
They are 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, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies 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 UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent Company and of their
profit or loss for that period. In preparing each of the Group and
parent Company financial statements, the Directors are required to:
• Select suitable accounting policies and then apply them
consistently
Directors’ Responsibility Statement
We confirm that to the best of our knowledge:
1. The financial statements, prepared in accordance with the
applicable set of accounting standards, 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;
• Make judgements and estimates that are reasonable, relevant,
2. The Strategic Report which is incorporated into the Directors’
reliable and prudent
• For the Group financial statements, state whether they have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and, as regards the group financial statements, International
Financial Reporting Standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union
• For the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the parent
company financial statements
• Assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern
• 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 parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
Report includes a fair review of the development and performance
of the business and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
Declaration
We consider the annual report and accounts, 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.
The Statement of Directors’ Responsibilities has been approved by the
Board and is signed on its behalf by:
Nick Roberts
Chief Executive Officer
1 March 2021
Alan Williams
Chief Financial Officer
1 March 2021
Travis Perkins plc Annual Report and Accounts 2020
119
Financial statementsGovernanceStrategic report
Financial statements
120
Travis Perkins plc Annual Report and Accounts 2020
Financial statements
Strategic report
Governance
Financial statements
Other information
Other information
Group financial statements
120 Independent Auditor’s report
129 Consolidated income statement
129 Consolidated statement of comprehensive income
130 Consolidated balance sheet
131 Consolidated statement of changes in equity
132 Consolidated cash flow statement
133 Notes to the consolidated financial statements
Company financial statements
177 Company balance sheet
178 Company statement of changes in equity
179 Notes to the Company’s financial statements
Travis Perkins plc Annual Report and Accounts 2020
121
Financial statementsGovernanceStrategic report INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF TRAVIS PERKINS PLC
1. Our opinion is unmodified
We have audited the financial statements of Travis Perkins plc (“the
Company”) for the year ended 31 December 2020 which comprise
the Consolidated Income Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated and Company Balance
Sheets, the Consolidated and Company Statements of Changes in
Equity, the Consolidated Cash Flow Statement, and the related notes,
including the accounting policies.
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
2020 and of the Group’s loss for the year then ended;
We were first appointed as auditor by the shareholders on 28 May
2015. The period of total uninterrupted engagement is for the six
financial years ended 31 December 2020. 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 were provided.
Overview
Materiality:
group financial statements
as a whole
£13m (2019:£16m)
4.4% (2019: 4.7%) of Group
profit before tax and adjusting
items as disclosed on the face of
the income statement, which in
2020 we have averaged over a
period of five years.
91% (2019 92%) of Group profit
before tax and adjusting items as
disclosed on the face of the
income statement.
vs 2019
Wickes’ goodwill
impairment
Deferral of supplier
rebates into inventory
Parent Company’s key
audit matter:
Recoverability of the
Parent Company’s
investments in Wickes
subsidiary
New: Valuation of trade
receivables
•
•
•
•
the Group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union;
Coverage
the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and
Key audit matters
Recurring risks
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 to the
extent applicable.
Basis for opinion
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.
Event driven
122
Travis Perkins plc Annual Report and Accounts 2020
Other information
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, 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
summarise 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.
The risk
Our response
Wickes’ goodwill impairment
Forecast based assessment:
Our procedures included:
(Goodwill £455 million; 2019:
£455 million)
Refer to page 90 (Audit
Committee Report), page 136
(Critical judgements and key
sources of estimation
uncertainty) and pages 172
(financial disclosures)
The Goodwill allocated to the Wickes Cash
Generating Unit remains significant (£455
million) and represents one of the Group’s
most significant assets.
• Historical comparisons: Assessing the reasonableness
of the forecast used by considering the historical
accuracy of previous forecasts and the results currently
being achieved.
The 2019 year end impairment review of
Wickes indicated a small level of
headroom, and that the impairment
conclusion was sensitive to small changes
in assumptions about future performance
and the discount rate applied.
Generally, Covid-19 is likely to result in a
decrease in the fair value of certain assets,
and may also decrease Value in Use if, for
example, cash flows from an asset are
reduced or delayed, or the risk associated
with those cash flows increases.
As a result we consider the risk of a
material impairment arising in respect of
Wickes to continue to be significant.
We consider that the Wickes Value in Use
calculation has a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements as
a whole and possibly many times that
amount.
• Our sector experience: Assessing whether assumptions
used, in particular those relating to forecast revenue
growth and profit margins, 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 rate by comparing to
externally derived data, including available sources for
comparable companies.
• Sensitivity analysis: Performing our own sensitivity
analysis on the forecasts, including a reduction in
assumed growth rates reflecting Covid- 19 risks, reduced
ability to pass through cost price inflation and an
increased discount rate.
• Assessing indicators of impairment: Assessing
indicators of impairment up to the balance sheet date for
evidence that would materially change the conclusion on
the annual impairment assessment, including changes to
discount rate and updates to forecasts.
• Assessing transparency: Assessing whether the Group’s
disclosures regarding the sensitivity of the impairment
assessment to changes in key assumptions
appropriately reflects the risks inherent in the valuation
of goodwill.
Our results
We found the group’s conclusion that there is no impairment
of Wickes’ goodwill to be acceptable (2019: acceptable).
Travis Perkins plc Annual Report and Accounts 2020
123
Financial statementsGovernanceStrategic report Independent auditor’s report continued
to the members of Travis Perkins plc
2. Key audit matters: our assessment of risks of material misstatement continued
Deferral of supplier rebates
into inventory
Refer to page 89 (Audit
Committee Report) and page
152 (financial disclosures).
The risk
Our response
Complex calculation:
Our procedures included:
As the Group carries a wide range of
inventory, the volume of supplier income
arrangements that are required to be
deducted from the cost give rise to
complex calculations in the inventory
cost accounting.
We consider the risk to relate to the
accuracy of the inventory cost held on the
balance sheet at the year end.
The Group has transitioned a large
number of supplier agreements to net
pricing arrangements, reducing the
number of guaranteed retrospective
rebates, and has removed internal rebates
on a large proportion of its stock. This has
reduced the risk in current year and may
have an impact on risk assessment for
future audits, however given this process
remains ongoing deferral of supplier
rebates into inventory remains an area of
significant risk for 2020.
• Accounting analysis: Evaluating the appropriateness of
the methodologies applied in allocating rebates
attributable to inventory at the year end.
• Reperformance: Recalculating the rebate in stock based
on net merchanting inventory purchase cost and rebate
percentages from the rebate database. We assessed a
difference identified in the context of the overall balance
and materiality.
• Test of details: For a sample of rebate percentages
agree back to underlying supplier agreements.
• Assessing transparency: Considering the adequacy of
the Group’s disclosures regarding the degree of
complexity involved in arriving at the cost.
Our results
As a result of our work, we consider the deferral of supplier
rebates into inventory to be acceptable (2019: acceptable).
Valuation of trade receivables
Subjective estimate
Our procedures included:
(£662 million; 2019:
£743 million)
Refer to page 89 (Audit
Committee Report), page 136
(Critical judgements and key
sources of estimation
uncertainty) and pages 153
(financial disclosures).
The Group’s Merchanting and Plumbing
and Heating businesses sell products into
customers into Construction and Industrial
Markets within the UK. Customers range
from large national to small local
businesses. In current economic
conditions, including the impact of the
latest UK lockdown, we consider there to
be an increased inherent risk that such
customers fail to settle the amounts due.
This increases the estimation uncertainty
associated with the expected credit loss
provision calculation.
The effect of these matters is that, as part
of our risk assessment, we determined
that the valuation of trade receivables
associated with these businesses have a
high degree of estimation uncertainty.
• Tests of details: Substantively testing the data inputs
and mechanics of the model used to calculate historic
credit losses;
• Benchmarking assumptions: Challenging the key
assumptions used in the calculation of the expected
credit loss model by comparing to externally derived
data where possible, including available sources for
comparable companies, as well as assessing the impact
of Covid-19;
• Our sector experience: Assessing the Directors’
assumptions behind the provision against trade
receivables against our own knowledge of recent bad
debts in this industry; and
• Assessing transparency: Assessing the adequacy of the
Group’s disclosures about the degree of estimation
involved in arriving at the provision.
Our results
As a result of our work, we consider the valuation of trade
receivables to be acceptable. (2019: acceptable).
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Recoverability of the Parent
Company’s investments in
Wickes subsidiary
(£769 million; 2019:
£767 million)
Refer to page 90 (Audit
Committee Report), page 183
(Critical judgements and key
sources of estimation
uncertainty) and pages 185
(financial disclosures).
The risk
Our response
Forecast-based assessment:
Our procedures included:
The carrying amounts of the Parent
Company’s investments in Wickes Group
Limited is significant and its recoverability
is inherently uncertain. The estimated
recoverable amount of the investments is
determined with reference to value in use.
This is sensitive to key assumptions,
notably; the discount rate, forecast revenue
growth and forecast profit margins.
The audit of the investment in this
subsidiary has been the key focus of the
audit team during the audit of the parent
company this year.
The effect of these matters is that, as part
of our risk assessment, we determined
that the recoverable amount of the cost of
investments in Wickes Group Limited has
a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality for
the financial statements as a whole and
possibly many times that amount. In
conducting our final audit work, we
concluded that reasonably possible
changes to the value in use would not be
expected to result in material impairment.
• Benchmarking assumptions: Challenging, using our own
valuation specialists, the key inputs used in the Group’s
calculation of the discount rate by comparing to
externally derived data, including available sources for
comparable companies.
• Historical comparisons: Assessing the reasonableness
of the budgets by considering the historical accuracy of
the previous forecasts;
• Our sector experience: Evaluating the current level of
trading, including identifying any indications of a
downturn in activity, by examining the post year end
management accounts and considering our knowledge
of the Group and the market; and
• Assessing transparency: Assessing the adequacy of the
parent company’s disclosures in respect of the
investments in the Wickes subsidiary.
Our results
We found the group’s conclusion that there is no impairment
of the investment in the Wickes subsidiary to be acceptable
(2019: acceptable)
For each of the key audit matters reported, we performed the detailed tests above rather than seeking to rely on any of the group’s controls
because our knowledge of the design of these controls indicated that we would not be able to obtain the required evidence to support reliance
on controls.
In the prior year, we reported key audit matters in respect of uncertainties due to the UK exiting the European Union on our audit and the
related impact on the appropriateness of adopting the going concern basis of preparation for the Group and Parent Company financial
statements. Following the trade agreement between the UK and the EU, and the end of the EU-exit implementation period, the nature pf these
uncertainties has changed. We continue to perform procedures over material assumptions in forward looking assessments such as going
concern and impairment tests however we no longer consider the effect of the UK’s departure from the EU or going concern to be separate
key audit matters.
Travis Perkins plc Annual Report and Accounts 2020
125
Financial statementsGovernanceStrategic report
Group revenue
Group profit before tax
and adjusting items*
96%
(2019 91%)
Group total assets
Total profits and losses that
made up Group profit before tax
96%
(2019 93%)
Full scope for group audit purposes 2020
Full scope for group audit purposes 2019
Residual components
91%
(2019 92%)
92
91
87%
(2019 90%)
90
87
91
96
93
96
Independent auditor’s report continued
to the members of Travis Perkins plc
3. Our application of materiality and an overview of the
scope of our audit
Gross profit before tax
and adjusting items*
£132.7m (2019: £340.9m)
Materiality for the group financial statements as a whole was set at
£13m (2019: £16m), determined with reference to a benchmark of
group profit before tax and adjusting items*, which in 2020 we
averaged over a period of five years to account for fluctuations in
business performance arising from the Covid 19 pandemic. It
represents 4.4% (2019: 4.7%) of the stated benchmark, which
amounts to £297m in 2020 (2019:£340.9m).
Materiality for the parent company financial statements as a whole
was set at £6.5m (2019: £9.6m), determined with reference to a
benchmark of company total assets, of which it represents 0.1%
(2019: 0.2%).
Group PBT before tax
and adjusting items
Group materiality
Group Materiality
£13m (2019: £16m)
£13m
Whole financial
statements materiality
(2019: £16m)
£6.5m
Whole financial statements
performance materiality
(2019: £8m)
£7.8m
Range of materiality at 10
components (£7.8m-£3.3m)
(2019: £9.6m to £3.2m)
£0.5m
Misstatements reported to
the audit committee
(2019: £0.8m)
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable
level the risk that individually immaterial misstatements in individual
account balances add up to a material amount across the financial
statements as a whole.
Gross profit before tax
and adjusting items*
£132.7m (2019: £340.9m)
Group Materiality
£13m (2019: £16m)
Performance materiality was set at 50% (2019: 50%) of materiality
for the financial statements as a whole, which equates to £6.5m
(2019: £8m) for the group and £3.3m (2019: £4.8m) for the parent
company. We applied this percentage in our determination of
performance materiality based on the level of identified
misstatements during the prior period.
£13m
Whole financial
statements materiality
(2019: £16m)
£6.5m
Whole financial statements
performance materiality
(2019: £8m)
*adjusting items as disclosed on the face of the income statement
Group revenue
Group profit before tax
and adjusting items*
96%
(2019 91%)
91
96
91%
(2019 92%)
92
91
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.5m (2019:
£0.8m), in addition to other identified misstatements that warranted
reporting on qualitative grounds.
£7.8m
Range of materiality at 10
components (£7.8m-£3.3m)
(2019: £9.6m to £3.2m)
Group total assets
Total profits and losses that
made up Group profit before tax
*adjusting items as disclosed on the face of the income statement
Group PBT before tax
and adjusting items
Group materiality
£0.5m
Misstatements reported to
the audit committee
(2019: £0.8m)
Of the group’s 55 (2019: 53) reporting components, we subjected 10
(2019: 9) to full scope audits for group purposes. The components
within the scope of our work accounted for the percentages illustrated
opposite. The remaining 4% (2019: 9%) of total group revenue, 9%
(2019: 8%) of group profit before tax and adjusting items* and 4%
(2019: 7%) of total group assets is represented by 45 (2019: 44)
reporting components, none of which individually represented more
than 5% (2019: 3%) of any of total group revenue, group profit before
tax and adjusting items* or total group assets. For these 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.
96%
(2019 93%)
93
96
87%
(2019 90%)
90
87
Full scope for group audit purposes 2020
Full scope for group audit purposes 2019
Residual components
The Group 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 team approved the
component materialities, which ranged from £3.3m to £7.8m (2019:
£3.2m to £9.6m), having regard to the mix of size and risk profile of
the Group across the components. The work on 4 of the 10
components (2019: 3 of the 9 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 team held video and telephone conference meetings with
these component auditors to assess the audit risk and strategy. At
these meetings, the findings reported to the Group team were
discussed in more detail, and any further work required by the Group
team was then performed by the component auditor.
* Adjusting items as disclosed on the face of the income statement
126
Travis Perkins plc Annual Report and Accounts 2020
Other information
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate;
• we have not identified, and concur with the directors’ assessment
that there is not, a material uncertainty related to events or
conditions that, individually or collectively, may cast significant
doubt on the Group’s or Company’s ability to continue as a going
concern for the going concern period;
• we have nothing material to add or draw attention to in relation to
the directors’ statement in the ‘General Information’ section in the
notes 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 the going concern period, and we found the going concern
disclosure in the ‘General Information’ section in the notes to be
acceptable; and
the related statement under the Listing Rules set out on page 117 is
materially consistent with the financial statements and our audit
knowledge.
•
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the
above conclusions are not a guarantee that the Group or the
Company will continue in operation.
4. Going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Group or the
Company or to cease their operations, and as they have concluded
that the Group’s and the Company’s financial position means that this
is realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and
Company’s financial resources or ability to continue operations over
the going concern period. The risk that we considered most likely to
adversely affect the Group’s and Company’s available financial
resources and metrics relevant to debt covenants over this period and
metrics relevant to debt covenants was lower than expected trading
volumes and the expected de-merger of the Wickes business.
We considered whether these risks could plausibly affect the liquidity
or covenant compliance in the going concern period by assessing the
Directors’ sensitivities over the level of available financial resources
and covenant thresholds indicated by the Group’s financial forecasts
taking account of severe, but plausible adverse effects that could arise
from these risks individually and collectively.
Our procedures also included:
• Evaluating how the Group’s risk assessment process identifies
business risks relating to events and conditions that may cast
significant doubt on the ability to continue as a going concern.
• Evaluate the models the Group uses in its assessment and
evaluate how the information system captures events and
conditions that may cast significant doubt on ability to continue as
a going concern.
• Critically assessing the assumptions in base case and downside
scenarios relevant to liquidity and covenant metrics, in particular in
relation to plausible impacts of Covid-19 by comparing to actual
experience in the year, historical trends in severe economic
situations and overlaying knowledge of the entity’ plans based on
approved budgets and our knowledge of the entity and the sector
in which it operates. In addition, assessing whether downside
scenarios applied mutually consistent and severe assumptions in
aggregate, using our assessment of the possible range of each key
assumption and our knowledge of inter-dependencies.
Travis Perkins plc Annual Report and Accounts 2020
127
Financial statementsGovernanceStrategic report Independent auditor’s report continued
to the members of Travis Perkins plc
5. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material misstatement due
to fraud
To identify risks of material misstatement due to fraud (“fraud risks”)
we assessed events or conditions that could indicate an incentive or
pressure to commit fraud or provide an opportunity to commit fraud.
Our risk assessment procedures included :
• Enquiring of directors, the audit committee and internal audit and
inspection of policy documentation as to the Group’s high-level
policies and procedures to prevent and detect fraud including the
internal audit function, and the Group’s channel for
“whistleblowing”, as well as whether they have knowledge of any
actual, suspected or alleged fraud.
• Reading Board, audit, remuneration and nomination committee
minutes.
• Considering remuneration incentive schemes and performance
targets for directors.
• Using analytical procedures to identify any unusual or unexpected
relationships.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the audit.
This included communication from the group to component audit
teams of relevant fraud risks identified at the Group level and request
to component audit teams to report to the Group audit team any
instances of fraud that could give rise to a material misstatement
at group.
As required by auditing standards, and taking into account possible
pressures to meet profit targets, we perform procedures to address
the risk of management override of controls and the risk of fraudulent
revenue recognition, in particular the risk that revenue is recorded in
the wrong period and the risk that Group and component
management may be in a position to make inappropriate accounting
entries. We did not identify any additional fraud risks.
We performed procedures including identifying journal entries to test
for all full scope components based on risk criteria and comparing the
identified entries to supporting documentation. These included those
posted to unusual accounts.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from
our general commercial and sector experience and through
discussion with the directors and other management (as required by
auditing standards), and discussed with the directors and other
management the policies and procedures regarding compliance with
laws and regulations.
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
the Group level, and a request for component auditors to report to the
group team any instances of non-compliance with laws and
regulations that could give rise to a material misstatement at group.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect
the financial statements including financial reporting legislation
(including related companies legislation), distributable profits
legislation, taxation legislation and pension legislation and we
assessed the extent of compliance with these laws and regulations as
part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified the
following areas as those most likely to have such an effect: health and
safety, anti-bribery, employment law, recognising the nature of the
Group’s activities. Auditing standards limit the required audit
procedures to identify non-compliance with these laws and
regulations to enquiry of the directors and other management and
inspection of regulatory and legal correspondence, if any. Therefore if
a breach of operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect that breach.
We discussed with the audit committee matters related to actual or
suspected breaches of laws or regulations, for which disclosure is not
necessary, and considered any implications for our audit.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements in
the financial statements, even though we have properly planned and
performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the
financial statements, the less likely the inherently limited procedures
required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of
non-detection of fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
controls. Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing non-compliance
or fraud and cannot be expected to detect non-compliance with all
laws and regulations.
128
Travis Perkins plc Annual Report and Accounts 2020
6. We have nothing to report on the other information 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 have not identified material misstatements in the strategic
•
•
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 emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a
material inconsistency between the directors’ disclosures in respect of
emerging and principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw
attention to in relation to:
•
the directors’ confirmation within the viability statement on page
43 that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would
threaten its business model, future performance, solvency and
liquidity;
the Principal Risks disclosures describing these risks and how
emerging risks are identified, and explaining how they are being
managed and mitigated; and
the directors’ explanation in the viability statement 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.
•
•
.
Other information
We are also required to review the viability statement, set out on page
43 under the Listing Rules. Based on the above procedures, we have
concluded that the above disclosures are materially consistent with
the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a
material inconsistency between the directors’ corporate governance
disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements and our
audit knowledge:
•
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;
the section of the annual report describing the work of the Audit
Committee, including the significant issues that the audit
committee considered in relation to the financial statements, and
how these issues were addressed; and
the section of the annual report that describes the review of the
effectiveness of the Group’s risk management and internal control
systems.
•
•
We are required to review the part of Corporate Governance Report
relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our
review. We have nothing to report in these respects.
7. 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.
Travis Perkins plc Annual Report and Accounts 2020
129
Financial statementsGovernanceStrategic report Independent auditor’s report continued
to the members of Travis Perkins plc
8. Respective responsibilities
9. The purpose of our audit work and to whom we owe
Directors’ responsibilities
As explained more fully in their statement set out on page 119, 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 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 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.
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
and the terms of our engagement by the Company. 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 the further matters we are required to state to
them in accordance with the terms agreed with the Company, 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.
Anthony Sykes
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square,
Canary Wharf,
London,
E14 5GL
2 March 2021
130
Travis Perkins plc Annual Report and Accounts 2020
Consolidated income statement
For the year ended 31 December 2020
Other information
£m
Revenue
Adjusted operating profit
Amortisation of acquired intangible assets
Adjusting items – operating
Operating profit
Adjusting items – remeasurement of associates
Share of associates’ result
Interest on lease liabilities
Other finance costs
Finance income
(Loss)/profit before tax
Adjusting items – deferred tax
Other tax
Total tax
(Loss)/profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
(Loss)/earnings per ordinary share:
Basic
Diluted
Notes
1
2(a)
3
2(a)
3
6(a)
6(a)
6(a)
3
7(a)
20(a)
20(a)
2020
6,157.5
226.7
(9.2)
(140.4)
77.1
–
0.5
(59.0)
(37.2)
10.9
(7.7)
(6.4)
(7.8)
(14.2)
(21.9)
(22.4)
0.5
(21.9)
(8.8p)
(8.8p)
All results relate to continuing operations. The accompanying notes form an integral part of these financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2020
£m
(Loss)/profit for the year
Items that will not be reclassified subsequently to profit and loss:
Actuarial gain/(loss) on defined benefit pension schemes
Income tax relating to other comprehensive income
Items that may be reclassified subsequently to profit and loss:
Foreign exchange differences on retranslation of foreign operations
Total other comprehensive income/(loss) for the year net of tax
Total comprehensive income for the year
All other comprehensive income is attributable to the owners of the Company.
Notes
18(h)
7(b)
2020
(21.9)
113.1
(22.2)
(2.0)
88.9
67.0
2019
6,955.7
441.5
(9.0)
(200.4)
232.1
40.3
(4.3)
(57.0)
(35.2)
4.9
180.8
(27.1)
(30.9)
(58.0)
122.8
121.1
1.7
122.8
48.9p
48.4p
2019
122.8
(43.0)
8.3
3.2
(31.5)
91.3
Travis Perkins plc Annual Report and Accounts 2020
131
Financial statementsGovernanceStrategic report Consolidated balance sheet
As at 31 December 2020
£m
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Interest in associates
Investments
Retirement benefit asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Tax debtor
Cash and cash equivalents
Total current assets
Assets of disposals Group classified as held for sale
Total assets
Equity and liabilities
Capital and reserves
Issued share capital
Share premium account
Merger reserve
Revaluation reserve
Own shares
Foreign exchange reserve
Other reserve
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Deferred tax liabilities
Retirement benefit liability
Long-term provisions
Total non-current liabilities
Current liabilities
Lease liabilities
Derivative financial instruments
Trade and other payables
Tax liabilities
Short-term provisions
Total current liabilities
Total liabilities
Liabilities of disposal Group classified as held for sale
Total equity and liabilities
Notes
2020
2019
8(a)
8(b)
9
10(a)
30(a)
30(b)
18(c)
11
13
23(b)
14
19
19
19
19
19
19
19
19
22
10(a)
16
18(c)
15
10(a)
27
17
15
14
1,358.5
312.0
830.4
1,145.5
–
9.2
178.4
3,834.0
840.7
892.7
6.5
505.6
2,245.5
–
6,079.5
25.2
545.6
326.5
14.3
(39.5)
1.2
–
1,840.5
2,713.8
–
2,713.8
575.7
1,168.3
77.2
–
21.9
1,843.1
158.8
1.6
1,304.2
–
58.0
1,522.6
3,365.7
–
6,079.5
1,359.1
332.6
882.0
1,276.8
1.9
6.7
57.5
3,916.6
937.8
1,239.7
–
207.9
2,385.4
138.0
6,440.0
25.2
545.6
326.5
14.5
(50.8)
3.2
(4.1)
1,722.6
2,582.7
4.4
2,587.1
583.3
1,253.6
62.7
4.9
8.0
1,912.5
158.7
2.5
1,613.9
13.4
60.4
1,848.9
3,761.4
91.5
6,440.0
The financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on 1 March 2021 and signed on
its behalf by:
Nick Roberts
Director
Alan Williams
Director
132
Travis Perkins plc Annual Report and Accounts 2020
Consolidated statement of changes in equity
For the year ended 31 December 2020
Other information
£m
Share
capital
Share
premium
Merger
reserve
Revaluation
reserve
At 1 January 2019
25.2
545.4
326.5
14.7
Own
shares
(47.8)
Impact of the change in
accounting policy
Adjusted balance at 1 January
–
–
–
–
–
2019
25.2
545.4
326.5
14.7
(47.8)
Profit for the year
Other comprehensive income/
(loss) for the period net of tax
Total comprehensive income
for the year
Dividends paid
Dividend equivalent payments
Issue of share capital
Purchase of own shares
Adjustments in respect of
revalued fixed assets
Arising on acquisition
Equity-settled share-based
payments
Tax on equity-settled share-
based payments
Option on non-controlling
interest
Own shares movement
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
–
–
–
–
–
–
–
–
–
(7.7)
–
–
–
–
–
4.7
At 31 December 2019
25.2
545.6
326.5
At 1 January 2020
25.2
545.6
326.5
14.5
14.5
(50.8)
(50.8)
(Loss)/profit for the year
Other comprehensive (loss)/
income/for the period net of
tax
Total comprehensive (loss)/
income for the year
Sale of own shares
Option on non-controlling
interest
Adjustments in respect of
revalued fixed assets
Exercise of options over
non-controlling interest
Adjustment to IFRS 16 - Leases
transition (note 10)
Equity-settled share-based
payments
Tax on equity-settled share-
based payments
Other tax
Own shares movement
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.2)
–
–
–
–
–
–
–
–
–
6.4
–
–
–
–
–
–
–
4.9
–
–
–
–
3.2
3.2
–
–
–
–
–
–
–
–
–
–
3.2
3.2
–
(2.0)
(2.0)
–
–
–
–
–
–
–
–
–
Foreign
exchange
reserve
Other
Retained
earnings
Total equity
before
non–controlling
interest
Non–
controlling
interest Total equity
(5.6) 1,847.5
2,705.9
11.8
2,717.7
–
(106.1)
(106.1)
–
(106.1)
(5.6)
1,741.4
2,599.8
121.1
121.1
(34.7)
(31.5)
11.8
1.7
2,611.6
122.8
86.4
(116.2)
(0.1)
–
–
0.2
(11.9)
89.6
(116.2)
(0.1)
0.2
(7.7)
–
(11.9)
–
(9.1)
–
–
–
–
–
–
–
–
–
–
–
1.5
–
–
–
–
–
–
23.0
23.0
4.5
–
(4.7)
4.5
1.5
–
(4.1) 1,722.6
2,582.7
(4.1) 1,722.6
2,582.7
–
(22.4)
(22.4)
68.5
–
4.9
0.2
4.1
(4.1)
–
–
–
–
–
40.3
15.6
(1.7)
(0.9)
(4.9)
–
–
40.3
15.6
(1.7)
(0.9)
–
–
1.7
–
–
–
–
–
–
–
–
4.4
4.4
0.5
–
–
–
–
–
–
–
–
(31.5)
91.3
(116.2)
(0.1)
0.2
(7.7)
–
(21.0)
23.0
4.5
1.5
–
2,587.1
2,587.1
(21.9)
–
–
–
40.3
15.6
(1.7)
(0.9)
–
2,713.8
90.9
88.9
–
88.9
66.5
6.4
0.5
–
67.0
6.4
4.9
(4.9)
At 31 December 2020
25.2
545.6
326.5
14.3
(39.5)
1.2
– 1,840.5
2,713.8
Travis Perkins plc Annual Report and Accounts 2020
133
Financial statementsGovernanceStrategic report Consolidated cash flow statement
For the year ended 31 December 2020
£m
Cash flows from operating activities
Adjusted operating profit (note 2a)
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Lease terminations and impairments
Amortisation and impairment of internally-generated intangibles
Share-based payments
Foreign exchange
Other non-cash movements
Gain on disposal of subsidiary
Gain on disposal of property, plant and equipment
Purchase of toolhire assets
Adjusted operating cash flows
Decrease/(increase) in inventories
Decrease in receivables
Decrease in payables
Decrease in supplier financing arrangements
Payments in respect of adjusting items
Pension payments in excess of the income statement charge
Cash generated from operations
Interest paid
Interest on lease liabilities
Debt arrangement fees
Current 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
Acquisition of businesses
Disposal of businesses
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Bank facility fee
Net sale/purchase of own shares
Repayment of lease liabilities
Payments to pension scheme
Dividends paid
Purchase of non-controlling interest
Bond issue
Repayment of bond
Draw down of bank facilities
Repayment of borrowings
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December (note 23b)
134
Travis Perkins plc Annual Report and Accounts 2020
2020
2019
226.7
441.5
89.6
171.7
–
16.6
15.6
2.0
-
(3.2)
(11.5)
(6.4)
501.1
97.1
481.0
(383.6)
–
(65.2)
(11.5)
618.9
(29.5)
(59.0)
–
(44.5)
485.9
1.3
64.2
(5.4)
(121.5)
–
–
53.7
(7.7)
–
(2.9)
6.4
(163.1)
(3.4)
–
(6.0)
248.5
(260.0)
400.0
(400.0)
(180.5)
297.7
207.9
505.6
97.5
174.3
2.2
23.5
19.9
4.1
4.2
–
(20.6)
(9.2)
737.4
(104.2)
12.5
(36.4)
(0.1)
(90.0)
(9.9)
509.1
(27.0)
(57.0)
(2.9)
(52.9)
369.4
0.8
82.0
(8.4)
(125.2)
(20.6)
(23.0)
–
(94.4)
0.2
–
(7.7)
(175.6)
(3.4)
(116.2)
(19.8)
–
–
–
–
(322.5)
(47.5)
255.4
207.9
Notes to the consolidated financial statements
For the year ended 31 December 2020
Other information
General information
Overview
Travis Perkins plc is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is given
on page 192. The nature of the Group’s operations and its principal activities are set out in the Strategic Report on pages 3 to 73.
These financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group operates.
Basis of accounting
The Group financial statements have been prepared in accordance with international accounting standards in conformity with the requirements
of the Companies Act 2006 and in accordance with International Financial Reporting Standards (“IFRS”) adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
The Company has elected to prepare its Parent Company financial statements in accordance with FRS 101; these are presented on pages 179
to 188.
Basis of preparation
The financial statements have been prepared on the historic cost basis, except that derivative, other financial instruments and contingent
consideration arising from business combinations are stated at fair value through profit and loss and also designated financial instruments are
stated at fair value through other comprehensive income. 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 power over the investee
•
• Has the ability to use its power to affect its returns
Is exposed or has rights to a variable return from the involvement with the investee
As such, the results of subsidiaries acquired during the year are included in the consolidated income statement from the effective date of acquisition.
Foreign currencies
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.
Going concern
After reviewing the Group’s forecasts and risk assessments and making other enquiries, the Directors have formed a judgement at the time of
approving the financial statements, that there is a reasonable expectation that the Group and the Company have adequate resources to
continue in operational existence for the 12 months from the date of signing this Annual Report & Accounts. For this reason, the Directors
continue to adopt the going concern basis in preparing the financial statements.
In arriving at their opinion the Directors considered:
• The Group’s cash flow forecasts and revenue projection
• The expected demerger of the Wickes business, which is within the control of the directors, and its impact, should the demerger be approved
by shareholders in the Extraordinary General Meeting scheduled for 27 April 2021, on the Group’s balance sheet and liquidity profile
• The impact on trading performance of severe but plausible downside scenarios, including continued Covid-19 restrictions, the removal of
government support schemes such as Stamp Duty Relief and the Covid-19 Job Retention Scheme and adverse macroeconomic conditions.
Key assumptions include significant reductions in revenue, removal of property profits and limited reductions in fixed overheads, as well as
mitigating actions such as delayed capital expenditure and continued dividend suspension
• The committed facilities available to the Group (see note 22) 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 44 to 51 during periods of
uncertain economic outlook and challenging macroeconomic conditions
Significant accounting policies
The principal accounting policies adopted in preparing the financial statements are provided throughout the notes to the financial statements.
Key judgements and estimates
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 and current and expected economic conditions. The Directors frequently re-evaluate these significant factors and make
adjustments as facts and circumstances dictate.
Some financial information is produced by finance systems that were first implemented by the Group over 30 years ago. As the business has
grown, these have been amended to cope with significantly higher transaction levels and more complicated ways of doing business. This has
made the systems unwieldy and could result in a material misstatement in the information calculated by those systems in areas such as
supplier income and inventories. There are processes and controls in place to mitigate these risks.
Travis Perkins plc Annual Report and Accounts 2020
135
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
General information continued
Key estimates including those that have a significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities
within the next financial year are found in the following notes:
Page
153
161
172
Note
13
18
28
Description
Impairment of trade receivables
Pension assumptions
Impairment of goodwill
Notes to the financial statements
The notes are organised into the following sections:
Income and expenses: Provides a breakdown of individual line items in the income statement and summarises the accounting policies,
judgements and estimates relevant to understanding these items.
Assets and liabilities: Provides a breakdown of individual line items in the balance sheets and summarises the accounting policies, judgements
and estimates relevant to understanding these items.
Capital: Provides information about the capital management practices of the Group and shareholder returns for the year.
Risks: Discusses the Group’s impairment testing and the exposure to various financial risks, explains how these affect the Group’s financial
position and performance and what the Group does to manage these risks.
Group structure: Explains aspects of the Group structure and how changes have affected the financial position and performance of the Group.
People: Provides information about people costs.
Other: Provides information on items which require disclosure, but are not considered critical in understanding the financial performance or
position of the Group.
Significant items
During the year ended 31 December 2020 the following significant items took place that are relevant to the understanding of the Group’s results
and financial position:
Covid-19 pandemic:
During the year ended 31 December 2020 the UK’s economic outlook has deteriorated as a consequence of the Covid-19 pandemic and the
measures taken by the government to control the spread of the virus. In these circumstances, neither the Group nor its customers have been
able to trade in a normal manner. The Group’s performance was significantly impacted as discussed in the Strategic Report on pages 3 to 73.
The planned demerger of the Wickes business was also put on hold in order to focus on managing through the pandemic and to maximise
liquidity across the Group.
The Group appropriately used government assistance from the Coronavirus Job Retention Scheme and Business Rates Relief arrangements.
During the year, after the repayment of support received by Wickes and Toolstation and December 2020, the Group has benefited from £39.1m
of furlough support and from £34.8m of Business Rates Relief.
Business restructuring (note 3):
In June 2020, in response to Covid-19 and an expectation of reduced sales volumes in 2020 and 2021, the Group announced a significant
programme of branch closures and the restructuring of distribution, administrative and sales functions. The costs associated with these
activities have been disclosed as adjusting items.
Group simplification (note 31):
Consistent with the Group’s objectives of simplifying the portfolio and focusing on the trade customer, two businesses were sold during 2020.
The wholesale Plumbing & Heating business, Primaflow F&P, was sold in January 2020 for cash consideration of £50.1m. The assets and
liabilities of this business were classified as assets held for sale in the Group balance sheet as at 31 December 2019. The Tile Giant business was
sold in September 2020 for consideration of £6.1m. The Group also acquired the remaining non-controlling interests in TF Solutions and UFHS.
136
Travis Perkins plc Annual Report and Accounts 2020
Other information
Income and expenses
1. Revenue
Accounting policy
Revenue recognition
Revenue is recognised when the Group has satisfied its performance obligations to the customer and the customer has obtained control of the
goods or services being transferred. Performance obligations to the customer in respect of sales of goods are satisfied on delivery or collection
by customer. Payments are typically due from credit customers not later than the last day of the month following the month of delivery. Revenue
is measured at the transaction price 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.
Customer rebates
Where the Group has rebate agreements with its customers, the value of variable income with respect to customer rebates, calculated in
accordance with the agreements in place based on the amount which is highly probably not to reverse, is deducted from turnover in the year in
which the revenue is recognised.
a. Revenue
£m
Sale of goods
Sale of services
b. Revenue reconciliation and like-for-like sales
£m
2019 revenue
Network change
Trading days
2019 like-for-like revenue
Like-for-like change
Network change
2020 revenue
Like-for-like revenue %
Merchanting
Retail
Toolstation
3,703.4
(193.1)
14.1
3,524.4
(494.0)
34.4
3,064.8
(14.0%)
1,342.4
(20.7)
3.6
1,325.3
65.9
-
1,391.2
5.0%
445.1
(1.7)
1.2
444.6
98.8
89.3
632.7
22.2%
2020
5,969.1
188.4
6,157.5
Plumbing
& Heating
1,464.8
(268.0)
4.8
1,201.6
(135.1)
2.3
1,068.8
(11.2%)
2019
6,739.0
216.7
6,955.7
Total
6,955.7
(483.5)
23.7
6,495.9
(464.4)
126.0
6,157.5
(7.1%)
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, including changes to the number of trading days. When branches close, revenue is excluded from the prior year figures for the
months equivalent to the post-closure period in the current year.
2. Profit
a. Operating profit
£m
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administrative expenses
Profit on disposal of properties
Other operating income (note 4b)
Operating profit
Adjusting items (note 3)
Amortisation of acquired intangible assets
Adjusted operating profit
Profit on disposal of properties
Adjusted operating profit before property disposals
2020
6,157.5
(4,326.2)
1,831.3
(1,387.2)
(387.0)
11.5
8.5
77.1
140.4
9.2
226.7
(11.5)
215.2
2019
6,955.7
(4,921.1)
2,034.6
(1,475.9)
(353.6)
20.6
6.4
232.1
200.4
9.0
441.5
(20.6)
420.9
Travis Perkins plc Annual Report and Accounts 2020
137
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Income and expenses continued
2. Profit continued
b. Adjusted profit
£m
(Loss)/profit before tax
Adjusting items (note 3)
Amortisation of acquired intangible assets
Adjusted profit before tax
Total tax
Tax on adjusting items
Adjusting items - deferred tax (note 3)
Tax on amortisation of acquired intangible assets
Adjusted profit after tax
2020
(7.7)
140.4
9.2
141.9
(14.2)
(27.0)
6.4
(1.7)
105.4
2019
180.8
160.1
9.0
349.9
(58.0)
(36.3)
27.1
(1.6)
281.1
Adjusted profit excludes adjusting items and amortisation of acquired intangible assets.
3. Adjusting items
Accounting policy
Adjusting items are those items of income and expenditure that, by reference to the Group, are material in size or unusual in nature or incidence
and 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 adjusting 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.
£m
Adjusting items – operating
Branch closures and restructuring
Wickes separation and demerger costs
Wickes store impairment
IT-related settlement and impairment charge
Plumbing & Heating separation and disposal process
Supply chain and restructuring costs
Closure of businesses
Adjusting items – business acquisitions
Fair value gain on the acquisition of Toolstation Europe
Adjusting items – tax
Deferred tax rate change
Rollover relief deferred tax
2020
2019
120.9
11.1
12.6
(4.2)
–
–
–
140.4
–
–
6.4
–
6.4
146.8
–
11.7
–
107.6
46.5
21.5
13.1
200.4
(40.3)
(40.3)
–
27.1
27.1
187.2
Branch closures and restructuring
In response to Covid-19 and an expectation of reduced sales volumes in 2020 and 2021, and in response to changing customer requirements
and a shift to delivered sales, in June 2020 the Group commenced a significant programme of branch closures and the restructuring of
distribution, administrative and sales functions.
This will result in the closure of around 190 branches across the overall branch estate, representing approximately 10% of the Group’s network.
The branch closures are concentrated in the Merchant businesses and in particular on small branches in the Travis Perkins General Merchant
and on branches in the Plumbing & Heating contracts businesses. In total, the Group reduced the number of roles by around 2,500 or
approximately 9% of the workforce. Costs recognised in relation to these closures are as follows:
• £66.4m of property costs arising on the closure of branches and office locations, including a £26.5m impairment charge in respect of
right-of-use assets
138
Travis Perkins plc Annual Report and Accounts 2020
Other information
• £27.2m of redundancy and other restructuring costs
• £13.3m of fixed asset impairments
• £14.0m of inventory provisions in respect of closed branches and associated restructuring
Wickes separation and demerger
The Group incurred costs preparing to demerge the Wickes business. This was paused in March 2020 given the uncertainty of the impact of
Covid-19 and volatility in the equity market and the demerger is now expected to complete in April 2021. The costs disclosed as adjusting consist of:
• £7.6m of costs related to the separation of IT functions from the Group
• £3.5m of professional service fees incurred in preparation for the demerger
Wickes store impairment
An impairment charge of £12.6m was recognised in respect of five Wickes stores where the impacts of Covid-19 have made it more challenging
to implement the performance improvement plans necessary to generate cash flows that support the stores’ value-in-use. The impairment
reviews were carried out using assumptions consistent with the impairment review of the Wickes CGU (note 28). The remaining lease term was
used as the remaining useful life. The impairment has been recognised against the right-of-use assets associated with these stores, which are
the only material assets.
IT-related impairment charge
The gain of £4.2m is the result of the full and final settlement of claims in relation to the cancelled replacement of the Group’s merchant
ERP system.
Deferred tax rate change
The tax charge includes an adjusting charge of £6.4m arising from the increase in the rate of UK corporation tax effective on 1 April 2020 from
17% to 19%.
2019
The following items were disclosed as adjusting in 2019:
• An impairment charge of £107.6m after the previous programme to develop a replacement ERP for the Merchant businesses was halted.
• Costs of £46.5m incurred in relation to separation of the Plumbing & Heating business from the Group’s central IT infrastructure and
support functions to enable the business to operate autonomously and support any future disposal.
• £11.7m of Wickes separation and demerger costs were disclosed as adjusting following the Group’s announcement of its intention to
demerge the Wickes business.
• Restructuring costs of £21.5m relating to cost reduction activities in the supply chain and support centre of the merchant business, including
the costs of closure of the Group’s range centre and timber network.
• Losses recognised following the closure of the Built business in April 2019.
• A fair value gain on the acquisition of Toolstation Europe of £40.3m following the remeasurement of the investment at fair value.
• A deferred tax charge of £27.1m following the Group’s change in property strategy and therefore its assessment of its ability to use rollover
relief indefinitely on capital gains in 2019.
4. Expenses and other income
a. Operating profit
Operating profit has been arrived at after charging/(crediting):
£m
Movement of provisions against inventories
Cost of inventories recognised as an expense
Government grants from furlough scheme
Pension costs in administration expenses
Pension costs in selling and distribution costs
Impairment losses for trade receivables (note 13)
Gain on disposal of property, plant and equipment
2020
9.2
4,246.0
(39.1)
1.2
21.8
19.4
(11.5)
2019
7.0
4,914.1
–
1.3
23.7
20.6
(20.6)
The UK Government has offered a range of financial support packages to help companies affected by Covid-19. The Group has elected to
deduct the grants from the furlough scheme in reporting the related administrative expense. The Group benefited from £34.8m of business
rates relief in 2020.
b. Other operating income
£m
Rental income
Profit on disposal of business/subsidiary (note 31)
2020
5.3
3.2
8.5
2019
6.4
–
6.4
Travis Perkins plc Annual Report and Accounts 2020
139
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Income and expenses continued
4. Expenses and other income continued
c. Auditor’s remuneration
During the year the Group incurred the following costs for services provided by the Company’s auditor:
£000
Fees payable to the Company’s auditor for audit services:
Audit of the Company’s annual accounts
Auditor for the audit of the Company’s subsidiaries
Additional fees payable for the prior period audit
Fees paid to the Company’s auditor for other services:
Audit-related assurance services
Services relating to corporate finance transactions
Other services
2020
210
1,382
65
125
475
–
2,257
2019
160
940
155
55
502
59
1,871
A description of the work of the Audit Committee is set out in the Audit Committee report on pages 87 to 92 and includes an explanation of
how auditor objectivity and independence is safeguarded when the auditor provides non-audit services.
5. Business segments
The operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief
Operating Decision Maker (“CODM”), which is considered to be the Board, to assess performance and allocate capital. The Group has four
operating segments:
• Merchanting
• Retail
• Toolstation
• Plumbing & Heating
These segments reflect the Group’s organisation around differences in products (general building versus plumbing & heating), customers (trade
versus consumer) and price and range flexibility (fixed range and fixed price versus variable and variable range).
All operating segments sell building materials to a wide range of customers, none of which are dominant, and operate almost exclusively in the
United Kingdom.
Segment result represents the result of each segment without allocation of certain central costs, finance income and costs and tax. Unallocated
segment assets and liabilities comprise financial instruments, current and deferred tax, cash and borrowings and pension scheme assets
and liabilities.
140
Travis Perkins plc Annual Report and Accounts 2020
Other information
a. Segment information
£m
Revenue
Segment result
Amortisation of acquired intangible assets
Adjusting items
Adjusted segment result
Less property profits
Adjusted segment result excluding property profits
Adjusted segment margin
Adjusted segment margin excluding property profits
2020
Merchanting
Retail
Toolstation
Plumbing &
Heating
Unallocated
Consolidated
3,064.8
1,391.2
632.7
1,068.8
–
6,157.5
65.7
6.2
89.1
161.0
(9.2)
151.8
5.3%
5.0%
51.1
–
26.9
78.0
(0.9)
77.1
5.6%
5.5%
4.3
2.4
0.9
7.6
–
7.6
1.2%
1.2%
(1.0)
0.6
20.8
20.4
(1.4)
19.0
1.9%
1.8%
(43.0)
–
2.7
(40.3)
–
(40.3)
–
–
77.1
9.2
140.4
226.7
(11.5)
215.2
3.7%
3.5%
Average capital employed
2,084.4
1,325.2
430.1
379.8
(70.7)
4,148.8
Segment assets
Segment liabilities
Consolidated net assets
2,583.5
(963.5)
1,620.0
1609.2
(1,086.1)
523.1
567.5
(271.2)
296.3
579.6
(355.0)
224.6
739.7
(689.9)
6,079.5
(3.365.7)
49.8
2,713.8
Capital expenditure
Amortisation of acquired intangible assets
Depreciation and amortisation of software
68.4
6.2
65.5
17.0
–
26.1
4.6
0.6
6.6
26.2
–
2.5
133.3
9.2
106.2
17.1
2.4
5.5
2019
£m
Revenue
Segment result
Amortisation of acquired intangible assets
Adjusting items
Adjusted segment result
Less property profits
Adjusted segment result excluding property profits
Adjusted segment margin
Adjusted segment margin excluding property profits
Merchanting
Retail
Toolstation
Plumbing &
Heating
Unallocated
Consolidated
3,703.4
1,342.4
445.1
1,464.8
–
6,955.7
275.4
6.1
23.5
305.0
(20.7)
284.3
8.2%
7.7%
85.0
–
11.6
96.6
–
96.6
7.2%
7.2%
22.0
2.6
–
24.6
–
24.6
5.5%
5.5%
3.7
0.3
45.4
49.4
(1.0)
48.4
3.4%
3.3%
(154.0)
–
119.9
(34.1)
1.1
(33.0)
232.1
9.0
200.4
441.5
(20.6)
420.9
–
–
6.3%
6.1%
Average capital employed
2,287.4
1,479.9
344.9
356.9
(82.3)
4,386.8
Segment assets
Segment liabilities
Consolidated net assets
Capital expenditure
Amortisation of acquired intangible assets
Depreciation and amortisation of software
3,037.3
(1,224.6)
1,705.5
(1,134.7)
1,812.7
570.8
89.0
6.1
67.4
23.8
–
27.8
552.4
(241.0)
311.4
13.2
2.6
4.3
860.2
(528.7)
331.5
284.6
(723.9)
(439.3)
6,440.0
(3,852.9)
2,587.1
15.8
0.3
8.0
1.0
–
9.4
142.8
9.0
116.9
Travis Perkins plc Annual Report and Accounts 2020
141
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Income and expenses continued
5. Business segments continued
b. Unallocated segment assets and liabilities
Unallocated segment assets and liabilities comprise the following:
£m
Assets
Interest in associates
Financial instruments
Property, plant and equipment
Investments
Cash and cash equivalents
Retirement benefit surplus
Unallocated corporate assets
Tax asset
Liabilities
Financial instruments
Tax liabilities
Deferred tax liabilities
Retirement benefit obligations
Interest-bearing loans, borrowings and loan notes
Unallocated corporate liabilities
2020
2019
-
2.8
35.2
9.2
505.6
178.4
2.0
6.5
739.7
(3.5)
–
(77.2)
–
(575.7)
(33.5)
(689.9)
1.9
3.2
3.2
6.7
207.9
57.5
4.2
–
284.6
–
(13.3)
(62.7)
(4.9)
(583.3)
(59.7)
723.9
Non-current assets owned by Toolstation Europe Limited are located in foreign countries.
c. Reportable segments
Segmental operating profit represents the profit earned by each segment without allocation of certain central costs, finance income and costs
and income tax expense. Inter-segment trading is eliminated. Unallocated segment assets and liabilities comprise financial instruments, current
and deferred taxation, cash and borrowings and pension scheme assets and liabilities.
6. Net finance costs
a. Finance costs and finance income
£m
Interest on bank loans and overdrafts
Interest on bonds
Accelerated interest on repayments of 2014 bond (Note 22)
Unwinding of discounts – property provisions
Unwinding of discounts – pension SPV loan
Amortisation of issue costs of bank loans*
Other interest
Net loss on remeasurement of foreign exchange
Net loss on remeasurement of derivatives at fair value
Finance costs before lease interest
Interest on lease liabilities
Finance costs
Net gain on remeasurement of derivatives at fair value
Net gain on remeasurement of foreign exchange
Other finance income – pension scheme
Interest receivable
Finance income
Net finance costs
2020
(3.1)
(19.5)
(10.0)
(0.2)
(2.1)
(2.3)
–
–
–
(37.2)
(59.0)
(96.2)
1.4
6.4
1.1
2.0
10.9
(85.3)
2019
(2.0)
(21.0)
–
(0.2)
(2.2)
(2.9)
(2.3)
(3.3)
(1.3)
(35.2)
(57.0)
(92.2)
–
–
2.4
2.5
4.9
(87.3)
* Includes a £1.5m accelerated charge recognised as the result of the replacement of the Group’s previous banking agreement with a new £400m agreement in January 2019.
The charge caused by the unwinding of discounts relates to the property provisions and the pension scheme SPV loan (note 15) and the
pension scheme SPV loan (note 18).
142
Travis Perkins plc Annual Report and Accounts 2020
b. Interest for non-statutory measures
£m
Interest on bank loans and overdrafts
Interest on bonds
Amortisation of issue costs of bank loans
Unwinding of discounts – liability to pension scheme
Interest for non-statutory measures
Other information
2020
3.1
29.5
2.3
2.1
37.0
2019
2.0
21.0
2.9
2.2
28.1
7. Tax
Accounting policy
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 of other assets and liabilities in a transaction (other
than in a business combination) 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.
a. Tax charge in income statement
£m
Current tax:
Current year
Prior year
Total current tax
Deferred tax:
Current year
Prior year
Total deferred tax
Total tax charge
2020
24.1
0.3
24.4
(9.2)
(1.0)
(10.2)
14.2
2019
44.0
(3.1)
40.9
(12.1)
29.2
17.1
58.0
The differences between the total tax charge and the amount calculated by applying the standard rate of UK corporation tax to the profit before
tax for the Group is as follows:
(Loss)/profit before tax
Tax at the UK corporation tax rate
Tax effect of expenses/credits that are not deductible/taxable
Depreciation of non-qualifying property
Share-based payments
Deferred tax rate change
Losses
Gain on disposal of business
Gain on Toolstation Europe acquisition
Prior period adjustment
Tax expense and effective tax rate for the year
2020
£m
(7.7)
(1.5)
0.9
3.4
2.5
6.4
3.4
(0.2)
–
(0.7)
14.2
%
19.0
(184.4)
2019
£m
180.8
34.4
2.4
3.0
(1.3)
(0.7)
1.9
–
(7.8)
26.1
58.0
%
19.0
32.1
Travis Perkins plc Annual Report and Accounts 2020
143
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Income and expenses continued
7. Tax continued
b. Tax charge in the statement of comprehensive income
The following amounts relating to tax have been recognised in other comprehensive income:
£m
Items that may not be reclassified:
Deferred tax charge on actuarial movement
Income tax relating to other comprehensive income
c. Tax credited directly to equity
The following amounts of tax have been recognised in equity:
£m
Current tax: Excess tax deductions for share-based payments on exercised options
Deferred tax: Revaluation reserve
Deferred tax: Share-based payments
2020
2019
(22.2)
(22.2)
2020
–
(0.9)
(1.7)
(2.6)
8.3
8.3
2019
0.4
–
4.1
4.5
Assets and liabilities
8. Goodwill and other intangible assets
Accounting policy
Goodwill
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 reversed. Goodwill is accordingly 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.
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.
a. Goodwill by reportable segment
£m
At 1 January 2019
Recognised on acquisitions (note 31e)
Reclassified to assets held for sale (note 14)
At 1 January 2020
Effect on movement in exchange rates
At 31 December 2020
Merchanting
661.0
–
–
661.0
–
661.0
Retail
455.2
–
–
455.2
–
455.2
Toolstation
Plumbing & Heating
103.4
72.0
–
175.4
(0.6)
174.8
69.6
0.8
(2.9)
67.5
–
67.5
Total
1,289.2
72.8
(2.9)
1,359.1
(0.6)
1,358.5
144
Travis Perkins plc Annual Report and Accounts 2020
Other information
b. Other intangible assets
Accounting policy
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 controlled by and for use within the business are capitalised
and written off over their estimated useful life, which ranges from three to ten 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. No amortisation is charged on assets in the course of construction.
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. Licence fees for using third-party software are expensed over the period the software
is in use.
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 one to seven years. No amortisation is charged on computer software under construction.
Brand
Computer software
Customer
relationships
Assets under
construction
£m
Cost or valuation
At 1 January 2019
Additions
Additions from acquired business (note 31)
Transfers between categories
Disposals
Derecognition (note 3)
At 1 January 2020
Additions
Transfers between categories
Derecognition
At 31 December 2020
Amortisation
At 1 January 2019
Charged on acquired intangibles
Charged on internally generated intangibles
Disposals
Impairment
At 1 January 2020
Charged on acquired intangibles
Charged on internally generated intangibles
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
301.9
–
16.8
–
–
–
318.7
–
–
–
318.7
67.8
2.2
–
–
–
70.0
2.9
–
72.9
248.7
245.8
112.9
6.4
–
7.2
(0.3)
–
126.2
4.1
2.5
–
132.8
59.0
0.9
19.4
(0.3)
4.1
83.1
–
16.6
99.7
43.1
33.1
141.8
–
3.4
–
–
–
145.2
–
–
–
145.2
102.5
5.9
–
–
–
108.4
6.3
–
114.7
36.8
30.5
Total
614.7
8.4
20.2
–
(0.4)
(48.8)
594.1
5.4
–
(0.2)
599.3
229.3
9.0
19.4
(0.3)
4.1
261.5
9.2
16.6
287.3
58.1
2.0
–
(7.2)
(0.1)
(48.8)
4.0
1.3
(2.5)
(0.2)
2.6
–
–
–
–
–
–
–
–
–
4.0
2.6
332.6
312.0
Where a brand 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, 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. 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 tests are shown in note 28.
Travis Perkins plc Annual Report and Accounts 2020
145
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
8. Goodwill and other intangible assets continued
c. Cash-generating units
The Directors consider that each branch or distribution network in the Group is an individual cash-generating unit (“CGU”). Goodwill and
intangible fixed 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 fixed assets with indefinite useful lives by CGU grouping.
£m
CGU grouping
Merchanting
CCF
Keyline
BSS Industrial
TF Solutions
Travis Perkins
Retail
Wickes
Toolstation
Toolstation UK
Toolstation Europe
Plumbing & Heating
City Plumbing Supplies
Plumbnation
PFP
Underfloor Heating Store
National Shower Spares
Reclassified to assets held for sale (note 14)
2020
2019
Intangibles
Goodwill
Total
Intangibles
Goodwill
Total
–
–
49.3
–
–
43.6
100.2
26.8
7.8
482.6
43.6
100.2
76.1
7.8
482.6
–
–
49.3
–
–
43.6
100.2
26.8
7.8
482.6
43.6
100.2
76.1
7.8
482.6
162.5
455.2
617.7
162.5
455.2
617.7
–
20.2
103.4
71.4
103.4
91.6
–
20.2
103.4
72.0
103.4
92.2
–
–
–
–
–
–
51.5
1.7
–
11.2
3.1
–
51.5
1.7
–
11.2
3.1
–
–
–
–
–
–
–
51.5
1.7
2.9
11.2
3.1
(2.9)
51.5
1.7
2.9
11.2
3.1
(2.9)
232.0
1,358.5
1,590.5
232.0
1,359.1
1,591.1
9. Property, plant and equipment
Accounting policy
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
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds net of expenses and
the carrying amount of the asset in the balance sheet and is recognised in the income statement. Where appropriate, the attributable revaluation
reserve remaining in respect of properties revalued prior to the adoption of IFRS is transferred directly to retained earnings.
146
Travis Perkins plc Annual Report and Accounts 2020
Long
leasehold
Short
leasehold
Plant and
equipment
£m
Cost or deemed cost
At 1 January 2019
Adjustment for change in accounting policy
Adjusted balance at 1 January 2019
Additions
Acquisition through business combinations (note 31)
Disposals
Reclassified to assets held for sale (note 14)
At 1 January 2020
Additions
Disposals
Disposals through business combinations
Reclassifications from current assets
Effect of movements in exchange rates
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Adjustment for change in accounting policy
Adjusted balance at 1 January 2019
Charged in the year
Disposals
Impairment charged in the year as an adjusting item
Reclassified to assets held for sale (note 14)
At 1 January 2020
Charged in the year
Disposals
Disposals through business combinations
Effect of movements in exchange rates
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
Freehold
475.1
–
475.1
21.6
–
(42.9)
–
453.8
12.3
(43.8)
–
–
–
422.3
49.4
–
49.4
6.1
(4.8)
1.2
–
51.9
9.7
(2.5)
–
–
59.1
401.9
363.2
The cost element of the tangible fixed assets carrying value is analysed as follows:
£m
At deemed cost
At cost
Freehold
21.2
401.1
422.3
36.0
(0.8)
35.2
0.8
–
(1.5)
–
34.5
–
(0.4)
–
–
–
34.1
14.6
(0.3)
14.3
0.8
(0.5)
–
–
14.6
1.0
(0.3)
–
–
15.3
19.9
18.8
Long
leases
3.6
30.5
34.1
238.7
(23.1)
215.6
36.1
4.4
(18.2)
–
237.9
44.7
(18.0)
(1.5)
–
1.0
264.1
97.2
(20.2)
77.0
12.1
(4.2)
0.2
–
85.1
11.8
(10.8)
(1.1)
0.5
85.5
152.8
178.6
Short
leases
–
264.1
264.1
Other information
Total
1,598.8
(49.9)
1,548.9
134.4
8.4
(106.2)
(6.6)
1,578.9
101.5
(125.4)
(16.1)
0.7
1.6
1,541.2
685.6
(31.6)
654.0
97.5
(54.8)
2.6
(2.4)
696.9
89.6
(67.5)
(9.2)
1.0
710.8
849.0
(26.0)
823.0
75.9
4.0
(43.6)
(6.6)
852.7
44.5
(63.2)
(14.6)
0.7
0.6
820.7
524.4
(11.1)
513.3
78.5
(45.3)
1.2
(2.4)
545.3
67.1
(53.9)
(8.1)
0.5
550.9
307.4
269.8
882.0
830.4
Plant and
equipment
–
820.7
820.7
Total
24.8
1,516.4
1,541.2
Included within freehold property is land with a value of £182.7m (2019: £200.0m) which is not depreciated. No assets are pledged as security
for the Group’s liabilities, other than 16 freehold properties, as disclosed in note 18.
Travis Perkins plc Annual Report and Accounts 2020
147
Financial statementsGovernanceStrategic report
Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
10. Leases
Accounting policy
IFRS 16 – Leases establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring
that lessees and lessors provide relevant information that faithfully represents those transactions.
Identifying a lease
At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if it conveys the
right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the Group has both
the right to direct the identified asset’s use and to obtain substantially all the economic benefits from that use.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each
lease component on the basis of their relative stand-alone prices. However, for fleet leases in which it is a lessee, the Group has elected not to
separate non-lease components and account for the lease and non-lease components as a single lease component. For each lease or lease
component, the Group follows the lease accounting model as per IFRS 16 – Leases, unless the recognition exceptions can be used.
Recognition exceptions
The Group has elected to account for lease payments as an expense on a straight-line basis over the lease term or another systematic basis for
the following two types of leases:
i)
ii) leases where the underlying asset has a low value when new – this election can be made on a lease-by-lease basis
leases with a lease term of 12 months or less and containing no purchase options – this election is made by class of underlying asset
For leases where the Group has taken short-term lease recognition exemption and there are any changes to the lease term or the lease is
modified, the Group accounts for the lease as a new lease.
Lessee accounting
Upon lease commencement the Group recognises a right-of-use asset and a lease liability.
Initial measurement
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in
the lease if that can be readily determined. If that rate cannot be readily determined, the Group uses the incremental borrowing rate.
Variable lease payments that depend on an index or a rate are included in the initial measurement of the lease liability and are initially measured
using the index or rate as at the commencement date. Amounts expected to be payable by the lessee under residual value guarantees are also
included. Variable lease payments that are not included in the measurement of the lease liability are recognised in profit or loss in the period in
which the event or condition that triggers payment occurs, unless the costs are included in the carrying amount of another asset under another
accounting standard.
Subsequent measurement
After lease commencement, the Group measures right-of-use assets using a cost model. Under the cost model a right-of-use asset is
measured at cost less accumulated depreciation and accumulated impairment.
The lease liability is subsequently remeasured to reflect changes in:
•
•
•
•
the lease term (using a revised discount rate)
the assessment of a purchase option (using a revised discount rate)
the amounts expected to be payable under residual value guarantees (using an unchanged discount rate)
future lease payments resulting from a change in an index or a rate used to determine those payments (using an unchanged discount rate)
The remeasurements are matched by adjustments to the right-of-use asset. Lease modifications may also prompt remeasurement of the lease
liability unless they are determined to be separate leases.
Depreciation
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of lease term. The estimated useful lives of right-of-use assets are determined on the same basis
as those of property, plant and equipment. In addition the right-of-use asset is reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The payments related to leases are presented under cash flows from financing activities and cash flows from operating activities in the cash
flow statement.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Lessor accounting
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance or operating lease. To classify each lease,
the Group makes an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of an
underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group
considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease
classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a
head lease is a short-term lease to which the Group applies the recognition exemption, then it classifies the sub-lease as an operating lease.
If an arrangement contains a lease and non-lease components, the Group applies IFRS 15 – Revenue from Contracts with Customers to
allocate the consideration in the contract.
The Group recognises operating lease payments as income on a straight-line basis over the lease term as part of “other income”. The Group
recognises finance income over the lease term of a finance lease, based on a pattern reflecting a constant periodic rate of return on the
net investment.
Sale and leaseback transactions
To determine whether the transfer of an asset is accounted for as a sale an entity applies the requirements of IFRS 15 – Revenue from
Contracts with Customers for determining when a performance obligation is satisfied.
If an asset transfer satisfies the requirements to be accounted for as a sale the seller measures the right-of-use asset at the proportion of the
previous carrying amount that relates to the right-of-use retained. Accordingly, the seller only recognises the amount of gain or loss that relates
to the rights transferred to the buyer.
If the fair value of the sale consideration does not equal the asset’s fair value, or if the lease payments are not market rates, the sales proceeds
are adjusted to fair value, either by accounting for prepayments or additional financing.
a. Amounts recognised in the balance sheet
Right-of-use assets:
£m
Land and buildings
Plant and equipment
Right-of-use assets reclassified as held for sale (note 14)
At 31 December
Additions to the right-of-use assets during the 2020 financial year end were £99.3m (2019: £77.5m).
Lease liabilities:
Lease liabilities included in the statement of financial position at 31 December:
£m
Current
Non-current
Liabilities classified as held for sale (note 14)
2020
1,103.3
42.2
–
1,145.5
2020
158.8
1,168.3
–
1,327.1
2019
1,220.5
75.3
(19.0)
1,276.8
2019
158.7
1,253.6
19.6
1,431.9
Certain accrual balances relating to rent-free periods and landlord incentives were incorrectly excluded from the adjustments made on
transition to IFRS 16 – Leases on 1 January 2019 and so remained on the balance sheet in the prior year. This has been corrected in 2020,
reducing other payables by £40.3m and increasing retained earnings by £40.3m.
Maturity analysis – contractual undiscounted cash flows:
£m
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 31 December (note 27f)
2020
211.1
700.1
754.5
1,665.7
2019
275.7
919.4
1,020.6
2,215.7
Travis Perkins plc Annual Report and Accounts 2020
149
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
10. Leases continued
b. Amounts recognised in the statement of profit and loss
The statement of profit and loss shows the following amounts relating to leases:
£m
Depreciation of right-of-use assets
Interest expense (included in finance costs)
Expense relating to short-term leases
Expense relating to leases of low-value assets
Impairment of right-of-use assets
Gains on lease terminations
Gains arising from sale-and-leaseback transactions
All impairments of right-of-use assets relate to land and buildings.
Depreciation of right-of-use assets by class of asset:
£m
Land and buildings
Plant and equipment
2020
171.7
59.0
3.7
3.2
39.1
(1.4)
(1.8)
2020
148.3
23.4
171.7
2019
174.3
57.0
3.3
3.4
8.6
–
(2.8)
2019
147.5
26.8
174.3
The total cash outflow for leases in 2020 was £222.1m (2019: £232.6m).
c. The Group’s leasing activities and how these are accounted for
The Group leases various properties, motor vehicles and equipment. Rental contracts are typically made for fixed periods but may have extension
options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
Leases are recognised as a right-of-use asset with a corresponding liability at the date at which the leased asset is available for use by the
Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable
• Variable lease payments that are based on an index or a rate
• Amounts expected to be payable by the lessee under residual value guarantees
• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
• Payments of penalties for terminating the lease if the lease term reflects the lessee exercising that option
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a
similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease liability
• Any lease payments made at or before the commencement date less any lease incentives received
• Any initial direct costs
• Restoration costs
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or
loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise mainly IT equipment, vending machines
and paint-mixing machines.
Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to
maximise operational flexibility.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that includes renewal options and
break clauses. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, and therefore the
amount of lease liabilities and right-of-use assets recognised.
Judgements in determining the lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the
lease is reasonably certain to be extended (or not terminated).
For property leases the following factors are normally the most relevant:
• The profitability of the leased store/warehouse and future plans for the business
•
If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate).
Most termination options on leases with impaired right-of-use assets are considered as reasonably certain to be exercised and therefore the
lease liabilities were calculated only to the break-clause date.
The Group as lessor
The Group leases a number of ex-trading properties and surplus units in trade parks owned by the Group to third parties. Property rental
income earned during the year in respect of these properties was £5.4m (2019: £6.4m).
At the balance sheet date, the Group had contracts with lessees for the following undiscounted future minimum lease payments:
£m
Within one year
One to two years
Two to three years
Three to four years
Four to five years
After five years
2020
4.5
3.9
3.5
3.1
2.8
8.7
26.5
2019
4.8
3.6
3.9
3.5
3.1
13.4
32.3
Inventories
11.
Accounting policy
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.
£m
Inventories
2020
840.7
2019
937.8
Travis Perkins plc Annual Report and Accounts 2020
151
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
12. Supplier income
Accounting policy
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.
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 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.
Supplier income balances included within the Group balance sheet are as follows:
£m
Other receivables and trade payables
Inventories
Net balance sheet position
13. Trade and other receivables
Accounting policy
2020
207.0
(91.0)
116.0
2019
428.0
(305.0)
123.0
Trade and other receivables
The Group’s trade and other receivables at the balance sheet date comprise principally of amounts receivable from the sale of goods, amounts
due in respect of rebates in relation to unbilled work in progress and sundry prepayments.
Impairment of financial assets
Trade receivables are subject to the expected credit loss model in IFRS 9 – Financial Instruments.
The Group applies the IFRS 9 – Financial Instruments simplified approach to measuring expected credit losses.
This uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses trade receivables have been
grouped based on shared credit risk characteristics and the days past due.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of
recovery include the failure of a debtor to engage in a repayment plan with the Group and the commencement of legal proceedings.
£m
Current:
Trade receivables
Allowance for doubtful debts
Other receivables
Loan notes
Prepayments and accrued income
Trade and other receivables
152
Travis Perkins plc Annual Report and Accounts 2020
2020
2019
664.4
(30.6)
633.8
187.9
2.8
68.2
892.7
743.0
(20.0)
723.0
444.4
–
72.3
1,239.7
The Directors consider that the only class of asset containing material credit risk is trade receivables. The average credit term taken for sales of
goods is 59 days (2019: 57 days). No interest is charged on the trade receivable from the date of the invoice until the date the invoice is
classified as overdue according to the trading terms agreed between the Group and the customer. Thereafter, the Group retains the right to
charge interest at 4% pa above the clearing bank base rate on the outstanding balance.
Other information
Movement in the allowance for doubtful debts
£m
At 1 January
Amounts written off during the year
Charge in the year
At 31 December
2020
20.1
(8.9)
19.4
30.6
2019
18.7
(19.3)
20.6
20.0
Expected credit loss assessment
The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as at 31 December 2020.
£m
Current (not past due)
Days overdue:
1–30
31–60
61–90
91–120
More than 120
Gross carrying
amount
Weighted average
loss rate
609.2
17.5
6.0
3.5
5.7
22.4
664.4
1.0%
12.6%
20.7%
49.9%
90.0%
90.0%
Net loss
allowance
(5.1)
(1.8)
(1.0)
(1.5)
(4.3)
(16.9)
(30.6)
Credit
impaired
No
No
No
No
No
Yes
Loss rates are based on actual credit loss experience over the past five years.
Key estimate - impairment of trade receivables
The outbreak of Covid-19 has had a material impact on businesses around the world and the economies in which the Group operates. Given the
rapidly changing economic impact and the effect of substantial government and central bank relief actions and support measures, the Directors
have made various judgements to best reflect the range of outcomes at the reporting date. The expected credit loss for current debt has been
increased to reflect the Group’s experience in the 2008–2009 recession and overdue debt has been provided against as if it were one ageing
bracket older.
In the view of the Directors, the highest reasonably possible level of debt impairment in 2021 would be 1.4% losses on current debt, reflecting
the Group’s experience in the 1990–1991 recession. This would increase the charge for credit losses in relation to debt as at 31 December 2020
by c.£2m and would reflect a scenario where the UK economy enters a deep recession in the financial and non-financial sectors of the
economy and where there was limited support offered to businesses, households and the economy by the UK Government and the Bank of
England. The lowest reasonably possible level of debt impairment would be 0.3% losses on current debt and historical levels on overdue debt.
This would reduce the credit losses in relation to debt as at 31 December 2020 by c.£7m and would reflect a scenario where either continued
government support or rapid economic recovery resulted in no significant economic downturn in 2021.
The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as at 31 December 2019.
£m
Current (not past due)
Days overdue:
1–30
31–60
61–90
91–120
More than 120
Gross carrying
amount
Weighted average
loss rate
Loss
allowance
Credit
impaired
673.7
35.0
13.6
3.5
2.1
15.1
743.0
0.4%
4.2%
7.8%
17.9%
31.4%
91.4%
(2.4)
(1.5)
(1.1)
(0.6)
(0.6)
(13.8)
(20.0)
No
No
No
No
No
Yes
Travis Perkins plc Annual Report and Accounts 2020
153
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
14. Non-current assets held for sale
The Primaflow F&P wholesale business, which formed part of the Plumbing & Heating segment, was sold on 31 January 2020 for cash
consideration of £50.1m. See note 31 for details. In accordance with IFRS 5 – Non-current Assets Held For Sale and Discontinued Operations, the
assets and liabilities of this business have been classified as held for sale in the balance sheet as at 31 December 2019.
Assets of disposal group classified as held for sale
Goodwill (note 8)
Property, plant and equipment (note 9)
Right-of-use assets (note 10)
Inventories
Trade and other receivables
Total assets
Liabilities of disposal group classified as held for sale
Non-current lease liability (note 10)
Current lease liability (note 10)
Trade and other payables
Total liabilities
£m
2.9
4.2
19.0
35.7
76.2
138.0
£m
17.5
2.1
71.9
91.5
No adjustment was made to write down the assets and liabilities held for sale to their fair value less cost to sell as this was in excess of their
carrying value. The Group has not presented Primaflow F&P’s operations as discontinued as this business was not a major line of business or
geographical area of operations, contributing £301.5m of the Group’s revenue in the year ended 31 December 2019.
15. Provisions
Accounting policy
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 dates, and are discounted to present value.
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 adjusting item, any release is shown as an adjusting credit.
The Group has a number of vacant and partly sublet leased properties. Where necessary a provision has been made for the residual
commitments for rates and other payments after taking into account existing and anticipated subtenant arrangements.
It is Group policy to self insure 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, in line with IAS 37.
The Group operates a large estate, with many sites running complex and busy yards. The Group also operates one of the largest vehicle fleets in
the UK, distributing heavy and bulky materials. Certain products that the Group sells pose health and safety risks. The Group is exposed to the
risk of accidents that cause significant harm to people, with associated fines and civil liabilities.
£m
Property
Insurance
Restructuring
At 1 January 2019
Adjustment for change in accounting policy
At 1 January 2019 (adjusted)
Charge to income statement
Utilisation of provision
Unwinding of discount
At 1 January 2020
Charge/(release) to income statement
Utilisation of provision
At 31 December 2020
Included in current liabilities
Included in non-current liabilities
154
Travis Perkins plc Annual Report and Accounts 2020
29.8
(12.4)
17.4
8.0
(4.3)
0.1
21.2
27.4
(6.8)
41.8
19.9
21.9
41.8
31.3
–
31.3
7.8
(6.4)
–
32.7
2.1
(3.5)
31.3
31.3
–
31.3
17.3
–
17.3
20.3
(23.1)
–
14.5
36.3
(44.0)
6.8
6.8
–
6.8
Total
78.4
(12.4)
66.0
36.1
(33.8)
0.1
68.4
65.8
(54.3)
79.9
58.0
21.9
79.9
Restructuring provision relates to the branch closures and restructuring activities treated as adjusting items and discussed note 3. It excludes
property-related provisions and inventory and trade creditor amounts which are separately classified.
Should a provision ultimately prove to be unnecessary then it is credited back to the income statement. Where the provision was originally
established as an adjusting item, any release is disclosed as an adjusting credit. The 2020 charge to property provisions of £27.4m is presented
after a credit of £5.8m relating to the release of property provisions originally created through adjusting items.
The following table details the Group’s liquidity analysis of its provisions, based on the undiscounted net cash outflows.
Other information
£m
2020:
Property
Insurance
Restructuring
2019:
Property
Insurance
Restructuring
0–1 year
1–2 years
2–5 years
5+ years
19.9
31.3
6.8
58.0
10.5
32.7
14.5
57.7
7.1
–
–
7.1
5.1
–
–
5.1
10.6
–
–
10.6
5.6
–
–
5.6
4.2
–
–
4.2
0.5
–
–
0.5
Total
41.8
31.3
6.8
79.9
21.7
32.7
14.5
68.9
16. Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current and prior
reporting periods.
£m
(Asset)/liability:
At 1 Jan
2019 Acquisitions
Recognised
in income
Recognised
in equity
Recognised
in other
comprehensive
income
At 1 Jan
2020 Acquisitions
Recognised
in income
Recognised
in equity
Recognised
in other
comprehensive
income
At 31 Dec
2020
Capital allowances
Trading losses
Revaluation of property
Share-based payments
Provisions
Property assets
acquired in business
combinations
Brand
Pension scheme asset
(note 18)
Adjusting items –
deferred tax (note 3)
Leases
Deferred tax
(2.2)
–
7.6
(2.0)
6.0
5.5
47.5
15.4
–
(21.3)
56.5
–
(1.9)
–
–
–
–
3.4
–
–
–
1.5
1.3
–
–
(3.6)
(4.5)
(0.6)
(2.5)
1.8
27.1
(1.9)
17.1
–
–
–
(4.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.9)
(1.9)
7.6
(9.8)
1.5
4.9
48.4
(8.3)
9.0
–
–
27.1
(23.2)
(4.1)
(8.3)
62.7
–
–
–
–
–
–
–
–
–
–
–
(4.8)
(0.4)
–
(0.2)
1.3
(0.1)
4.1
–
–
0.9
1.7
–
–
–
2.9
22.0
0.9
(13.8)
(10.1)
–
–
24.6
–
–
–
–
–
–
–
–
–
–
–
(5.7)
(2.3)
8.5
(8.3)
2.8
4.8
52.5
33.9
28.0
(37.0)
77.2
At 31 December 2020, the Group had unused capital losses of £40.6m (2019: £40.6m) 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 and 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.
The Group also has unused trading losses of £82.8m in relation to its Toolstation Europe business. Of these, no deferred tax asset has been
recognised on £70.9m as it is considered, at the balance sheet date, improbable that sufficient taxable profits will be generated in a time frame
suitable to allow for recognition. £21.0m of these losses are also subject to restricted carry forward rules reducing their likelihood of being
utilised further. This position will be reviewed annually.
A UK corporation rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously enacted reduction
in the rate from 19% to 17%. This will increase the company’s future current tax charge accordingly. The deferred tax liability at 31 December
2020 has been calculated at 19% (2019: 17%).
Travis Perkins plc Annual Report and Accounts 2020
155
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
17. Trade payables and other liabilities
Accounting policy
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs and are measured at amortised
cost. 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 time frame.
£m
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
Trade and other payables
2020
892.7
50.1
124.1
237.3
1,304.2
2019
1,143.4
74.2
227.5
168.8
1,613.9
Included in trade payables at 31 December 2020 are amounts of £89.8m (2019: £177.9m) which are due for settlement under supplier
financing arrangements with third-party banks. Suppliers choose to enter into these arrangements which provide access to the option of early
settlement of invoices at interest rates based on Travis Perkins’ credit rating. If suppliers do not elect for early payment, invoices are settled on
the date agreed in the existing payment terms. In some cases, Travis Perkins has agreed extensions to payment terms with suppliers who
regularly access the scheme, with the longest payment terms in place of 93 days, and extension of 31 days.
The total net amount outstanding where terms have been extended at 31 December 2020 was £18.3m (2019: £14.4m). These arrangements
do not provide the Group with a significant benefit of additional financing and have been put in place for the benefit of the Group’s suppliers,
providing them with access to cost-efficient third-party funding. As such outstanding balances are classified as trade payables and form part of
the operating cash flows movement in the Consolidated cash flow statement. There are no significant judgements applied in the calculation of
supplier finance balances.
During the year the Group deferred £107.4m of VAT payments through the UK Government’s financial support packages to help companies
affected by Covid-19. This was repaid on 18 December 2020. The other payables balance includes £37.5m in relation to the government
assistance from Business Rates Relief, following the Group’s decision to repay the benefits received by Wickes and Toolstation.
18. Pension arrangements
Accounting policy
Payments to defined contribution retirement benefit schemes are recognised as an expense when colleagues 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.
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 and future accrual.
Defined benefit schemes
The assets of the TP DB schemes are held separately from those of the Group under the control of the schemes’ trustees. Colleagues are
entitled to start drawing a pension, based on their membership of a scheme, on their normal retirement date. If colleagues 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.
A full actuarial valuation of the TP DB scheme was carried out as at 30 September 2020. The IAS 19 valuation has been based upon the results
of the 30 September 2020 valuation and then updated to 31 December 2020 by a qualified actuary. The present values of the defined benefit
obligations, the related current service costs and the past service costs for the TP Schemes 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 as at
30 September 2020. 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.
156
Travis Perkins plc Annual Report and Accounts 2020
Other information
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. This
entitlement was previously contingent and subject to funding levels, which resulted in a restriction in the amount recognised as a scheme asset.
These payments were guaranteed in December 2018. 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 and longevity risk. A
summary of the risks and the management of those risks is given below and continued overleaf.
Investment risk
Interest risk
Longevity 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.
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.
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 (eg listed equity, sovereign debt and
corporate bonds). Unlisted investments (eg 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.
The Directors have agreed with the BSS Schemes’ Trustees and the TP DB Schemes’ Trustees that, following the elimination of the deficits in
these schemes, no further contributions from the Group are currently required. The ongoing management and administrative expenses of the
BSS Schemes and the TP DB Schemes are also now being met by the schemes.
a. Major actuarial assumptions
Rate of increase of pensions in payment (post 2006 entitlement)
Rate of increase of pensions in payment 1997–2006
Discount rate
Inflation assumption – RPI
Inflation assumption – CPI
At 31 December
2020
At 31 December
2019
1.95%
2.70%
1.40%
2.75%
2.15%
2.05%
2.95%
2.00%
3.05%
2.05%
The yield curve used in setting the discount rate, which includes bonds with an average AA rating and excludes bonds which are sub-sovereign
or issued by universities to reflect the credit risk of the defined benefit schemes. In respect of longevity, the valuation adopts the S3PA 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.
The methodology for determining the inflation assumptions has been revised in the year in line with recent reforms. The net impact of the
revisions, principally changes to the inflation risk premium and the gap applied between RPI and CPI, has not had a material impact on the net
IAS 19 position.
Weighted average life expectancy at age 65 for mortality tables used to determine pension liabilities at 31 December 2020:
Current member age
45
45
65
65
Sex
Male
Female
Male
Female
Life expectancy
22.5
25.6
21.3
23.4
Travis Perkins plc Annual Report and Accounts 2020
157
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
18. Pension arrangements continued
b. Amounts recognised in income
£m
Current service costs and administration expenses
Net interest income
Total pension (charge)/credit
TP
Schemes
(1.2)
1.1
(0.1)
2020
BSS
Schemes
(0.4)
–
(0.4)
Group
(1.6)
1.1
(0.5)
TP
Schemes
(0.9)
2.3
1.4
2019
BSS
Schemes
(0.5)
0.1
(0.4)
Group
(1.4)
2.4
1.0
c. Amounts included in the balance sheet
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:
£m
Fair value of plan assets
Present value of defined benefit obligations
Gross actuarial surplus/(deficit)
Gross pension asset/(liability) at 31 December
Deferred tax liability (note 16)
Net pension asset at 31 December
TP
Schemes
1,359.7
(1,214.1)
145.6
145.6
2020
BSS
Schemes
411.1
(378.3)
32.8
32.8
Group
1,770.8
(1,592.4)
178.4
178.4
(33.9)
144.5
TP
Schemes
1,220.4
(1,165.4)
55.0
55.0
2019
BSS
Schemes
361.6
(364.0)
(2.4)
(2.4)
Group
1,582.0
(1,529.4)
52.6
52.6
(8.9)
43.7
The deferred tax liability of £33.9m (2019: £8.9m) has been recognised at the standard rate of corporation tax and not the 35% rate applicable
for refunds from pension schemes, as this rate best reflects the rate at which the liability will unwind.
£m
At 1 January actuarial asset/(deficit)
Current service costs and administration expenses charged to
the income statement
Net interest income
Contributions from sponsoring companies
Foreign exchange
Return on plan assets (excluding amounts included in net interest)
Actuarial gain/(loss) arising from changes in demographic
assumptions
Actuarial loss arising from changes in financial assumptions
Actuarial gain arising from experience adjustments
Gross pension asset/(liability) at 31 December
TP
Schemes
55.0
(1.2)
1.1
2.4
–
148.1
47.0
(127.4)
20.6
145.6
2020
BSS
Schemes
(2.4)
(0.4)
–
10.6
0.1
45.2
13.5
(36.1)
2.3
32.8
Group
52.6
(1.6)
1.1
13.0
0.1
193.3
60.5
(163.5)
22.9
178.4
TP
Schemes
82.3
(0.9)
2.3
2.1
–
127.1
(0.9)
(161.5)
4.5
55.0
2019
BSS
Schemes
(1.1)
(0.5)
0.1
11.3
–
34.7
(0.3)
(48.3)
1.7
(2.4)
Group
81.2
(1.4)
2.4
13.4
–
161.8
(1.2)
(209.8)
6.2
52.6
158
Travis Perkins plc Annual Report and Accounts 2020
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:
Other information
£m
Level 1:
Cash
Level 2:
Equities
Secured finance
Corporate bonds
Diversified growth fund
Liability driven investments
Repurchase agreements
Property funds
Level 3:
SPV asset
e. Actual return on scheme assets
TP Schemes
BSS Schemes
f. Movements in the fair value of scheme assets
£m
At 1 January
Interest on scheme assets
Return on scheme assets not including interest
Foreign exchange
Administration expenses
Contributions from sponsoring companies
Benefits paid
At 31 December
g. Movements in the present value of defined benefit obligations
£m
At 1 January
Service cost
Interest cost
Foreign exchange
Experience adjustments
Actuarial gain/(loss) arising from changes in demographic assumptions
Actuarial loss arising from changes in financial assumptions
Benefits paid
At 31 December 2020
At 31 December 2019
TP
Schemes
BSS
Schemes
TP
Schemes
BSS
Schemes
7.1
3.0
3.7
3.2
2.3
169.2
418.0
0.9
1,428.4
(800.3)
100.0
34.1
1,359.7
2.1
57.0
124.9
36.0
403.0
(243.9)
29.0
65.0
172.8
336.5
119.6
1,040.1
(656.7)
100.5
20.6
48.9
105.6
34.7
323.0
(203.5)
29.1
–
38.9
–
411.1
1,220.4
361.6
2020
2019
£m
172.2
52.3
%
14.1%
14.5%
£m
158.3
43.7
%
14.3%
13.5%
TP
Schemes
1,220.4
24.1
148.1
–
(0.8)
2.4
(34.5)
1,359.7
TP
Schemes
(1,165.4)
(0.4)
(23.0)
–
20.6
47.0
(127.4)
34.5
2020
BSS
Schemes
361.6
7.1
45.2
0.6
(0.4)
10.6
(13.6)
Group
1,582.0
31.2
193.3
0.6
(1.2)
13.0
(48.1)
TP
Schemes
1,103.8
31.2
127.1
–
(0.7)
2.1
(43.1)
2019
BSS
Schemes
322.8
9.1
34.7
(0.6)
(0.5)
11.3
(15.2)
Group
1,426.6
40.3
161.8
(0.6)
(1.2)
13.4
(58.3)
411.1
1,770.8
1,220.4
361.6
1,582.0
2020
BSS
Schemes
(364.0)
–
(7.1)
(0.5)
2.3
13.5
(36.1)
13.6
Group
(1,529.4)
(0.4)
(30.1)
(0.5)
22.9
60.5
(163.5)
48.1
TP
Schemes
(1,021.5)
(0.2)
(28.9)
–
4.5
(0.9)
(161.5)
43.1
2019
BSS
Schemes
(323.9)
–
(9.0)
0.6
1.7
(0.3)
(48.3)
15.2
Group
(1,345.4)
(0.2)
(37.9)
0.6
6.2
(1.2)
(209.8)
58.3
At 31 December
(1,214.1)
(378.3)
(1,592.4)
(1,165.4)
(364.0)
(1,529.4)
Travis Perkins plc Annual Report and Accounts 2020
159
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Assets and liabilities continued
18. Pension arrangements continued
h. Amounts recognised in the statement of other comprehensive income
£m
Return on scheme assets (excluding amounts included in net
TP
Schemes
2020
BSS
Schemes
Group
TP
Schemes
2019
BSS
Schemes
Group
interest)
148.1
45.2
193.3
127.1
34.7
161.8
Actuarial gain/(loss) arising from changes in demographic
assumptions
Actuarial loss arising from changes in financial assumptions
Actuarial gain arising from experience adjustments
Remeasurement of net defined pension liability
47.0
(127.4)
20.6
88.3
13.5
(36.1)
2.3
24.9
60.5
(163.5)
22.9
113.2
(0.9)
(161.5)
4.5
(30.8)
(0.3)
(48.3)
1.7
(12.2)
(1.2)
(209.8)
6.2
(43.0)
i. Maturity profile of obligations
The maturity profile and weighted average duration of the defined benefit obligations for the schemes are as follows:
£m
2020–2029
2030–2039
2040–2049
2050–2059
2060–2069
2070–2079
2080–2089
Weighted average duration
£m
2019–2028
2029–2038
2039–2048
2049–2058
2059–2068
2069–2078
2079–2088
Weighted average duration
2020
TP
Schemes
20.3%
26.6%
24.4%
17.9%
8.5%
2.0%
0.2%
BSS
Schemes
21.0%
27.0%
24.5%
17.6%
8.2%
1.7%
0.1%
19.3 years
19.3 years
2019
TP
Schemes
20.1%
26.4%
24.5%
18.1%
8.6%
2.1%
0.2%
BSS
Schemes
19.7%
26.9%
24.8%
18.1%
8.6%
1.8%
0.1%
19.2 years
19.2 years
j. Sensitivities
The estimated effects of changing the key assumptions (discount rate, inflation and life expectancy) on the IAS 19 – Employee Benefits (revised
2011) balance sheet position as at 31 December 2020 is given below.
£m
Assumption
Discount rate
Inflation
Longevity
Increase of 0.1%
Decrease of 0.1%
Increase of 0.1%
Decrease of 0.1%
Increase of 1 year
Decrease of 1 year
TP
Schemes
BSS
Schemes
(22)
23
14
(15)
57
(57)
(7)
7
6
(6)
20
(19)
k. Defined contribution schemes
The Group operates two defined contribution schemes for all qualifying colleagues. The pension cost, which represents contributions payable
by the Group, amounted to £21.4m (2019: £20.7m).
l. Pension scheme contributions for the year
The total charge to the income statement disclosed in note 4 of £23.0m (2019: £25.0m) comprises defined benefit scheme current service
costs of £1.6m (2019: £1.4m) and £21.4m (2019: £23.6m) of contributions payable to the defined contribution schemes.
160
Travis Perkins plc Annual Report and Accounts 2020
Other information
Key estimate over 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 is greater than 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 materially greater/lower 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.
The sensitivity of the balance sheet position to changes in key assumptions is disclosed in note 18(j).
Capital
19. Share capital and reserves
Accounting policy
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 colleagues under the
terms of the Group’s share incentive schemes or the Group’s Sharesave schemes or are sold, any consideration received is included in
shareholders’ equity.
a. Share capital
Ordinary shares of 10p
At 1 January 2019
Allotted under share option schemes
At 1 January 2020
Allotted under share option schemes
At 31 December 2020
Authorised, Issued and fully paid
No.
252,143,923
–
252,143,923
–
252,143,923
£m
25.2
–
25.2
–
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.
b. Own shares
No.
At 1 January
Acquired
Reissued
At 31 December
2020
2019
3,944,144
–
(1,065,123)
3,803,831
1,000,000
(859,687)
2,879,021
3,944,144
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.
Details of all movements in reserves for both the Group and Company are shown in their respective Statement of Changes in Equity.
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.
Travis Perkins plc Annual Report and Accounts 2020
161
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Capital continued
19. Share capital and reserves continued
c. Reserves
A description of the nature and purpose of each reserve is given below:
• The share premium represents the amounts above the nominal value received for shares sold
• 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
• Foreign exchange reserve represents the exchange differences recognised on translation of the assets and liabilities of the foreign operations
that have a functional currency different from the Group
• Retained earnings represents cumulative results for the Group
20. Earnings per share
a. Basic and diluted earnings per share
£m
Earnings for the purposes of earnings per share
Weighted average number of shares for the purposes of basic earnings per share
Dilutive effect of share options on potential ordinary shares
Weighted average number of ordinary shares for the purposes of diluted earnings per share
(Loss)/earnings per share
Diluted (loss)/earnings per share
2020
(21.9)
2019
121.1
248,566,317
–
247,957,050
2,293,525
248,566,317
250,250,575
(8.8p)
(8.8p)
48.9p
48.4p
382,770 share options (2019: 1,878,458 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. Share options that would be anti-dilutive
due to the Group generating a loss have also been excluded from the calculation.
b. Adjusted earnings per share
Adjusted earnings per share is calculated by excluding the effect of adjusting items and amortisation of acquired intangible assets from earnings.
£m
Earnings for the purposes of earnings per share
Adjusting items
Amortisation of acquired intangible assets
Tax on adjusting items
Adjusting deferred tax
Tax on amortisation of acquired intangible assets
Adjusted earnings
Adjusted earnings per share
Adjusted diluted earnings per share
2020
(21.9)
140.4
9.2
(27.0)
6.4
(1.7)
105.4
42.4p
42.4p
2019
121.1
160.1
9.0
(36.3)
27.1
(1.6)
279.4
112.7p
111.6p
21. Dividends
Accounting policy
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.
Amounts were recognised in the financial statements as distributions to equity shareholders as follows:
£m
Final dividend for the year ended 31 December 2019 of 31.50 pence (2018: 31.50 pence) per ordinary share
Interim dividend for the year ended 31 December 2020 of nil pence (2019: 15.50 pence) per ordinary share
Total dividend recognised during the year
2020
–
–
–
2019
78.2
38.0
116.2
162
Travis Perkins plc Annual Report and Accounts 2020
The dividends for 2020 and for 2019 were as follows:
Pence
Interim paid
Final proposed
Total dividend for the year
Other information
2020
–
–
–
2019
15.5
33.0
48.5
The Board suspended the proposal final dividend payment of 33.0 pence per ordinary share in respect of the year ended 31 December 2019
due to the impact of Covid-19. The Directors do not recommend a final dividend in respect of the year ended 31 December 2020.
22. Borrowings
Accounting policy
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.
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 page 43. At 31 December 2020 all borrowings were denominated in sterling (2019: sterling).
a. Summary
£m
Liability to pension scheme
Sterling bonds
Finance charges netted off borrowings
Current liabilities
Non-current liabilities
b. Analysis of other borrowings
£m
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
c. Facilities
At 31 December 2020, the following facilities were available:
£m
Drawn facilities:
£250m sterling bond (2014)
£250m sterling bond (2020)
£300m sterling bond
Undrawn facilities:
Five year committed revolving credit facility
Bank overdrafts
2020
30.1
550.0
(4.4)
575.7
–
575.7
575.7
2019
31.5
555.8
(4.0)
583.3
–
583.3
583.3
2020
2019
–
550.0
30.1
580.1
(4.4)
575.7
–
555.8
31.5
587.3
(4.0)
583.3
2020
2019
–
250.0
300.0
550.0
400.0
30.0
430.0
255.8
–
300.0
555.8
400.0
30.0
430.0
The Group’s £400m banking facility with a syndicate of banks was extended in 2020, with £54m maturing in January 2024 and the
remaining £346m maturing in April 2025. The disclosures in note 22(c) do not include leases, loan notes or the effect of finance charges
netted off bank debt.
Travis Perkins plc Annual Report and Accounts 2020
163
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Capital continued
22. Borrowings continued
c. Facilities continued
During November 2020 the Group raised £250m via a long five-year public bond issuance at a coupon of 3.75%. The proceeds were used to
repay the £250m September 2021 bond maturity before the end of December, As a result the previous bond was derecognised and a new one
was issued.
The Group continues to work closely with its relationship banking syndicate. Despite the strong liquidity position, given the impact of the
Covid-19 crisis and the resulting lockdown period on the Group’s income statement for 2020, the Group took the prudent step to agree a
relaxation of the financial covenants for the test dates at the end of June and December 2020, as follows:
• The interest cover covenant was waived for both June and December 2020
• The net leverage covenant was relaxed to 3.5x for June 2020
• The net leverage covenant was waived for December 2020
• A minimum liquidity headroom covenant of £100m was established as at 30 September 2020 and 31 December 2020
d. Interest
The weighted average interest rates received on assets and paid on liabilities were as follows:
%
Assets:
Short-term deposits
Liabilities:
£250m sterling bond (2020)
£250m sterling bond (2026)
£300m sterling bond
Bank loans and overdrafts
2020
2019
0.3
–
3.8
4.5
1.2
0.8
3.0
–
4.5
1.6
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.
£m
Assets:
Short-term deposits
Liabilities:
£250m sterling bond (2020)
£250m sterling bond (2026)
£300m sterling bond
2020
Effective
interest rate
2019
Effective
interest rate
£m
0.1%
455.0
–
3.8%
4.5%
–
250.0
300.0
550.0
0.8%
4.4%
4.5%
£m
140.0
255.8
300.0
555.8
e. Fair values
For both the Group and the Company the fair values of financial assets and liabilities have been determined based on the market prices at
31 December. There were no material 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 27.
f. 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, TP Property Company Limited,
Keyline Civils Specialist Limited, Toolstation Limited, The BSS Group Limited and City Plumbing Supplies Holdings Limited are guarantors of the
following facilities advanced to Travis Perkins plc:
• £250m sterling bond
• £300m sterling bond
• £400m revolving credit facility
• Currency derivatives (note 27)
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 £25m (2019: £25m).
164
Travis Perkins plc Annual Report and Accounts 2020
23. Net debt
Accounting policy
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.
Other information
Cash and cash
equivalents
(255.4)
–
47.5
–
–
–
–
Leases
21.0
1,566.9
(232.6)
–
–
–
57.0
(207.9)
1,412.3
–
–
(297.7)
–
–
–
–
99.3
(21.4)
(222.1)
–
–
–
59.0
(505.6)
1,327.1
a. Movement in net debt
£m
At 1 January 2019
Recognition of lease liability
Cash flow
Finance charges movement
Amortisation of swap cancellation receipt
Discount unwind on liability to pension scheme
Discount unwind on lease liabilities
At 1 January 2020
Additions to leases
Disposals of leases
Cash flow
Finance charges movement
Amortisation of swap cancellation receipt
Discount unwind on liability to pension scheme
Discount unwind on lease liabilities
31 December 2020
b. Covenant net debt
£m
Cash and cash equivalents
Non-current interest-bearing loans and borrowings
Non-current lease liabilities (note 10a)
Current lease liabilities (note 10a)
Net debt
Less: Liability to pension scheme
Less: Lease liabilities
Covenant net debt
Term loan and
revolving credit
facility and loan
notes
Unsecured
senior US$
notes and
Sterling bonds
Liability to
pension
scheme
(1.4)
–
(2.9)
2.2
–
–
–
(2.1)
–
–
(0.5)
0.6
–
–
–
(2.0)
556.6
–
–
0.7
(3.4)
–
–
553.9
–
–
–
(0.5)
(5.8)
–
–
32.8
–
(3.4)
–
–
2.1
–
31.5
–
–
(3.4)
–
–
2.0
–
Total
353.6
1,566.9
(191.4)
2.9
(3.4)
2.1
57.0
1,787.7
99.3
(21.4)
(523.7)
0.1
(5.8)
2.0
59.0
547.6
30.1
1,397.2
2020
2019
505.6
(575.7)
(1,168.3)
(158.8)
(1,397.2)
30.1
1,327.1
(40.0)
207.9
(583.3)
(1,253.6)
(158.7)
(1,787.7)
31.5
1,412.3
(343.9)
Cash and cash equivalents comprises short term deposits of £455.0m (2019: £140.0m) and cash of £50.6m (2019: £67.9m).
24. Free cash flow
£m
Adjusted operating profit
Less: Profit on disposal of properties
Adjusted operating profit excluding property profit
Depreciation of property, plant and equipment
Amortisation and impairment of internally generated intangibles
Share-based payments
Movement on working capital
Other net interest paid
Interest on lease liabilities
Income tax paid
Capital expenditure excluding freehold purchase
Disposal of plant and equipment
Free cash flow
2020
226.7
(11.5)
215.2
89.6
16.6
15.6
194.6
(28.2)
(59.0)
(44.5)
(107.7)
11.9
304.1
2019
441.5
(20.6)
420.9
97.5
23.5
19.9
(128.7)
(26.2)
(57.0)
(52.9)
(120.9)
19.4
195.5
Travis Perkins plc Annual Report and Accounts 2020
165
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Risk
25. Net debt to adjusted EBITDA
£m
Operating profit
Depreciation and amortisation
EBITDA
Adjusting operating items (note 3)
Share of associates’ results
Adjusted EBITDA
Net debt (note 23b)
Net debt to adjusted EBITDA
26. Return on capital ratios
Group return on capital employed is calculated as follows:
£m
Operating profit
Amortisation of acquired intangible assets
Adjusting items
Adjusted operating profit
Opening net assets
Net pension (surplus)/deficit
Net debt, including opening adjustment for change in accounting policy
Opening capital employed
Closing net assets
Net pension surplus
Net debt
Closing capital employed
Average capital employed
Group return on capital employed is calculated as follows:
£m
Adjusted operating profit
Average capital employed
Return on capital employed
166
Travis Perkins plc Annual Report and Accounts 2020
2020
77.1
287.1
364.2
140.4
0.5
505.1
1,397.2
2.8x
2020
77.1
9.2
140.4
226.7
2,587.1
(43.7)
1,787.7
4,331.1
2,713.8
(144.5)
1,397.2
3,966.5
2019
232.1
300.2
532.3
200.4
(4.3)
728.4
1,787.7
2.5x
2019
232.1
9.0
200.4
441.5
2,611.6
(65.8)
1,876.9
4,422.7
2,587.1
(43.7)
1,787.7
4,331.1
4,148.8
4,376.9
2020
226.7
4,148.8
5.5%
2019
441.5
4,376.9
10.1%
Other information
27. Financial instruments
Accounting policy
Investments and other financial assets classification
The Group classifies its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value (either through Other Comprehensive Income ‘‘FVOCI’’, or through profit or loss “FVTPL”)
• Those to be measured at amortised cost.
The classification depends on the business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are
not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the
equity investment at FVTPL or at FVOCI.
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs
that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit
or loss.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow
characteristics of the asset. There are two measurement categories into which the Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and
interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in finance income or finance costs,
together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the income statement.
• FVTPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on a debt instrument that is
subsequently measured at FVTPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises.
Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains
and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the
derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss when the Group’s right to receive
payments is established.
Changes in the fair value of financial assets at FVTPL are recognised in finance income or finance costs in the income statement as applicable.
Impairment losses (and the reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other
changes in fair value.
Put options on non-controlling interests
Put options on non-controlling interests are initially recognised directly in equity at the present value of the redemption liability. Subsequent
movements in fair value are recognised directly in equity.
Impairment
From 1 January 2018, the Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9 – Financial Instruments, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
Derivative financial instruments
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.
Foreign currency forward contracts are marked-to-market at the balance sheet date, with any gains or losses being taken through the
income statement.
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.
Travis Perkins plc Annual Report and Accounts 2020
167
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Risk continued
27. Financial instruments continued
a. The carrying value of categories of financial instruments
£m
2020
2019
Financial assets:
Mandatorily at FVTPL
Loans and receivables (including cash and cash equivalents) at amortised cost
Designated instrument-by-instrument as either FVTPL or FVOCI
Financial liabilities:
Mandatorily at FVTPL
Borrowings (note 22a)
Put options on non-controlling interests
Trade and other payables at amortised cost (note 17)
2.8
1,327.3
4.7
1,334.8
1.6
575.7
–
1,016.8
1,594.1
–
1,320.7
2.2
1,322.9
0.7
583.3
1.8
1,293.9
1,879.7
Loans and receivables exclude prepayments of £68.2m (2019: £54.3m). Trade and other payables exclude taxation and social security and
accruals and deferred income totalling £287.4m (2019: £243.0m). 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.
b. 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 (ie as prices) or indirectly (ie derived from prices)
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs)
There were no transfers between levels during the year.
£m
Included in assets:
Level 1
Loan notes at fair value through profit and loss
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
2020
2019
2.8
2.8
1.6
–
1.6
–
–
0.7
1.8
2.5
168
Travis Perkins plc Annual Report and Accounts 2020
Other information
c. 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 and 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 2020 no interest rate risks were hedged (2019: none).
d. 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 rate
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$85.0m (2019: US$35.0m). The fair value of these derivatives was £1.6m liability (2019: £0.7m liability). These contracts
are not designated cash flow hedges and accordingly the fair value movement has been reflected in the income statement.
e. Interest rate sensitivity analysis
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 31 December 2020 the Group had no floating rate liabilities. There was £455m on short-term deposit at 31 December 2020 (2019: £140m).
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 2020 would have increased/decreased by £4.6m (2019: increased/decreased by
£1.4m) due to the short-term deposits
• Net equity would have increased/decreased by £3.7m (2019: increased/decreased by £1.1m)
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.
£m
Total gross settled: foreign exchange forward contracts
Net settled:
Put options on non-controlling interests
Total derivative financial instruments
Net settled:
Borrowings
Trade and other payables at amortised cost (note 27a)
Leases (note 10a)
Total financial instruments
0–1 year
(64.7)
–
(64.7)
–
(1,016.8)
(211.1)
(1,292.6)
2020
1–2 years
2–5 years
5+ years
–
–
–
–
–
–
–
–
–
Total
(64.7)
–
(64.7)
–
–
(200.9)
(200.9)
(550.0)
–
(499.2)
(1,049.2)
(30.1)
–
(754.5)
(784.6)
(580.1)
(1,016.8)
(1,665.7)
(3,327.3)
Travis Perkins plc Annual Report and Accounts 2020
169
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Risk continued
27. Financial instruments continued
£m
Total gross settled: foreign exchange forward contracts
Net settled:
Put options on non-controlling interests
Total derivative financial instruments
Net settled:
Borrowings
Trade and other payables at amortised cost (note 27a)
Finance leases
Total financial instruments
0–1 year
(32.0)
(1.8)
(33.8)
–
(1,293.9)
(275.7)
(1,603.4)
2019
1–2 years
2–5 years
5+ years
–
–
–
–
–
–
–
–
–
Total
(32.0)
(1.8)
(33.8)
–
–
(259.5)
(259.5)
(555.8)
–
(659.9)
(1,215.7)
(31.5)
–
(1,020.6)
(1,052.1)
(587.3)
(1,293.9)
(2,215.7)
(4,130.7)
28. Impairment
Accounting policy
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 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.
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.
Due to Covid-19 and its impact on the UK economy and the Group, an impairment review was performed on Wickes business and the branches
and stores of the Travis Perkins General Merchant, BSS, CCF, Keyline, Plumbing & Heating and Wickes as at 30 June 2020 as part of the
preparation of the Group’s interim financial statements. No additional impairment triggers were identified for the Wickes business nor for these
stores and branches in the second half of 2020. The Travis Perkins General Merchant, BSS, CCF, Keyline, Plumbing & Heating, Toolstation UK
and Toolstation Europe businesses were reviewed for impairment as at 31 December 2020.
At the 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 value-in-use calculations require the use of assumptions.
Key assumptions
The key financial assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions
represent management’s assessment of current market conditions and future trends and have been based on historical data from both external
and internal sources.
Pre-tax discount rate
Long-term growth rate
170
Travis Perkins plc Annual Report and Accounts 2020
2020
2019
8.2-11.8%
1.5%
7.4–9.3%
1.6%
Other information
Management determined the values assigned to these financial assumptions as follows:
• Pre-tax discount rates: these are calculated by reference to the weighted average cost of capital (“WACC”) of the Group and reflect specific
risks relating to the Group’s industries and the countries in which the Group operates. The pre-tax discount rate is adjusted for risks not
adjusted for in the cash flow forecasts, including risks related to the size and industry of each CGU. Due to Covid-19 and its impact on debt
and equity markets, the Group’s cost of capital has increased since December 2019.
• Long-term growth rate: This is the weighted average growth rate used to extrapolate cash flows beyond the budget period. This represents the
forecast GDP growth for the final year considered in the Office for Budget Responsibility’s most recent Economic and Fiscal Outlook report.
Cash flow forecasts are derived from the most recent Board-approved corporate plans updated for changes in current trading conditions and
adjusted for risks relevant to the cash flows. These updates have included the impact of Covid-19 on sales, operating costs and government
support schemes, with the forecasts incorporating grants from business rates relief to March 2021. The forecasts have not assumed any
government support beyond March 2021. The key operating assumptions used in the estimation of future cash flows are:
• Sales market volume growth on which the approved corporate plans are based are derived from a variety of sources including construction
and consumer outlook reports, current and forecast housing market transaction numbers and mortgage approval levels. The Directors
consider this to be the principal operating assumption as it determines management’s approach to the interlinked factors underlying the
operating margin percentage.
• Operating margin percentage is forecast in the context of the sales market volume assumptions and is based on historical experience of
operating margins, adjusted for the impact of changes to product costs and cost-saving initiatives.
Cash flows beyond the corporate plan period (2025 and beyond) have been determined using the long term growth rate.
Impairment charge
At the end of 2020 financial year the recoverable amount of goodwill and intangible assets with indefinite useful lives in all segments was in
excess of their book value and therefore no impairment has been recognised. The impairment reviews have shown that the Wickes CGU, which
was disclosed as being sensitive to impairment in the Group’s 2019 Annual Report & Accounts, remains sensitive to changes in the assumptions
used in the impairment review. Additionally, an impairment of £45.1m was recognised in respect of closed branches across the Merchanting
and Plumbing & Heating networks and five Wickes stores as discussed in note 3.
Sensitivity to changes in assumptions
Whilst the Directors believe the assumptions are realistic, there are reasonably possible changes in key assumptions that would cause the
recoverable amount of the Wickes CGU to be lower than the carrying amount. The key variables applied to the value-in-use calculations for
Wickes and the value at which the recoverable amount would be equal to the carrying amount of £593.6m (2019: £564.3m), including the
effect of lease liabilities £128.2m (2019: £102.6m) in excess of right-of-use assets, were:
£m
Pre-tax discount rate
Long-term growth rate
Sales market volume growth
Operating margin
All other variables have been held equal.
2020
2019
Assumption
Sensitivity
Assumption
Sensitivity
11.8%
1.6%
1.0%
5.2%
12.3%
1.2%
0.6%
4.9%
9.3%
1.6%
1.0%
5.1%
10.7%
0.3%
(0.1%)
4.3%
The Directors have assumed that the unusual economic circumstances and government restrictions that currently exist as a result of Covid-19
will not exist at the end of the corporate plan period. Therefore, the market volume growth and operating margin assumptions and sensitivities
in this disclosure are based on conditions and performance before Covid-19 as the assumed conditions at the end of the corporate plan period.
The Directors assessed whether, as a result of estimation uncertainty in the key assumptions used in the impairment reviews, there is a
significant risk of a material adjustment to the carrying amount of any other CGU in 2021 and concluded that this is not the case.
Proposed Wickes demerger
In July 2019 the Group announced its intention to demerge Wickes business. Due to the impact of Covid-19 the planned demerger of the
Wickes business was put on hold in 2020. This activity has been restarted and if shareholders approve the demerger at the Extraordinary
General Meeting, scheduled for 27 April 2021, the Wickes business will be distributed to the Group’s shareholders. Should this happen then, in
accordance with IFRIC 17 – Distributions of Non-cash Assets to Owners, the Group will recognise the distribution at fair value. Any difference
between the fair value of the Wickes business and the carrying amount of the assets distributed will be recognised in profit or loss.
This is a different valuation basis from that applied in the impairment test, which compares the carrying amount to the higher of value-in-use
and fair value less costs of disposal.
Other CGU groupings
For all other material 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
from the impairment calculations undertaken.
Travis Perkins plc Annual Report and Accounts 2020
171
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Risk continued
28. Impairment continued
Key estimates over assumptions used in value-in-use calculations
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
materially impaired.
The pre-tax discount rate is derived from the Group’s WACC. The WACC is based upon the risk-free rate for 20 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.
29. Capital commitments
£m
Contracted for but not provided in the accounts
30. Investments
a. Interest in associates
The reconciliation of the Group’s interest in associates is given below:
£m
At 1 January
Additions to investments
Disposal of investments
Impairment of investments
Share of profit/(losses)
Derecognised following step acquisition (note 31)
Reclassification
At 31 December
2020
39.2
2019
37.2
2020
1.9
–
–
–
0.5
–
(2.4)
–
2019
34.2
20.6
(0.7)
(0.3)
(4.3)
(47.6)
–
1.9
Travis Perkins plc holds a 34% investment in The Mosaic Tile Company Limited. On 30 September 2020, the Group granted the holders of
the majority of the share capital a call option over the Group’s interest. The call option was exercisable by the purchase prior to the year-end.
As a result of this, the Directors concluded that they do not have significant influence and accordingly this investment was reclassified as an
equity investment.
During the year ended 31 December 2019 the Group disposed of its 49% investment in Toriga Limited and, following the step acquisition of
Toolstation Europe Limited (see note 31), the Group now owns 97.1% of the business and this is now accounted for as a subsidiary.
The interest in associates includes £nil (2019: £nil) of loans and preference shares.
The Group’s share of associates’ assets and liabilities are as follows:
£m
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Net assets
Group share of net assets
Goodwill
Carrying amount of investment in associates
172
Travis Perkins plc Annual Report and Accounts 2020
2020
–
–
–
–
–
–
–
–
2019
13.5
(8.4)
0.3
–
5.4
1.8
0.1
1.9
The Group’s share of associates’ income and expenses are as follows:
£m
Income
Expense
Net expense of equity accounted investments
Group share of revenue
Group share of net expense
b. Investments
£m
Equity investments designated as FVTPL:
Investment in property entity
Shares held in invested entities
Loans receivable at amortised cost:
Loans to property entities
Loans to invested entities
Other information
2020
–
–
–
–
–
2019
66.4
(77.4)
(11.0)
27.0
(31.3)
2020
2019
1.2
3.5
0.8
3.7
9.2
1.2
1.0
0.8
3.7
6.7
The investment in property entity represents a minority holding in a property-owning entity that acquired properties from the Group in 2006
and 2015. This investment presents 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 this entity totalling £0.8m
(2019: £0.8m) and charges interest at rates of between 10% and 12%.
Group structure
31. Business combinations and disposals
Accounting policy
All business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary
comprises the:
• Fair values of the assets transferred
• Liabilities incurred to the former owners of the acquired business
• Equity interests issued by the Group
• Fair value of any asset or liability resulting from a contingent consideration arrangement
• Fair value of any pre-existing equity interest in the subsidiary
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 – Business
Combinations 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
The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any
previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill.
The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the
non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred.
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.
Liabilities for contingent consideration are classified as fair value through profit and loss.
a. Disposal of Primaflow F&P
On 31 January 2020 the Group sold the Primaflow F&P wholesale business for cash consideration of £50.1m. Total net assets sold were
£48.3m generating profit on disposal of £1.8m. As presented in note 14, the net assets and liabilities of this business were classified as held for
sale on the balance sheet as at 31 December 2019. As a result of this transaction, £2.9m of goodwill was derecognised by the Group.
As this business did not represent a separate major line of business or geographical area of operations, it has not been shown as a discontinued
operation in the income statement. The revenue of £27.9m and adjusted operating profit of £0.7m in the period to 31 January 2020 are
presented in the Group’s financial statements as part of the Plumbing & Heating segment.
Travis Perkins plc Annual Report and Accounts 2020
173
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
Group structure continued
31. Business combinations and disposals continued
b. Disposal of Tile Giant Ltd
On 30 September 2020 the Group sold Tile Giant Limited for a total consideration of £6.1m generating profit on disposal of £1.4m. Total
consideration consists of cash consideration of £3.3m and loan notes of £2.8m.
As this business did not represent a separate major line of business or geographical area of operations it has not been shown as a discontinued
operation in the income statement. The revenue of £31.0m and adjusted operating loss of £0.2m in the period to 30 September 2020 are
presented in the Group’s financial statements as part of the Retail segment.
c. Acquisition of the Underfloor Heating Store Limited
On 30 October 2020 the Group acquired an additional 10% of the issued share capital of the Underfloor Heating Store Limited for cash
consideration of £6.0m. The Group now owns 100% of the issued share capital of this subsidiary. As a result of this transaction, the amount of
non-controlling interest recognised in the Group’s equity was reduced by £2.8m.
d. Acquisition of TFS Holdings Limited
On 17 December 2020 the Group acquired an additional 10% of the issued share capital of the TFS Holdings Limited for consideration of
£1.9m. The Group now owns 100% of the issued share capital of this subsidiary. As a result of this transaction, the amount of non-controlling
interest recognised in the Group’s equity was reduced by £1.6m.
e. Acquisition of Toolstation Europe Ltd in 2019
On 30 September 2019 the Group acquired an additional 49.5% of the ordinary share capital of Toolstation Europe Limited for transferred cash
consideration of £21.9m, giving the Group a controlling 97.1% share of the business. In accordance with the requirements of the acquisition
accounting method, the existing 47.5% investment in associate was remeasured to fair value. This fair value was calculated based on the
amount paid for the additional 49% acquired, creating a gain of £40.3m that was credited to the consolidated income statement as an adjusting
item (see note 3).
Consideration and assets and liabilities acquired
The consideration is as follows:
Consideration transferred: cash paid
Fair value of pre-existing equity investment
Settlement of pre-existing loans and preference shares
Total consideration
Fair values ascribed to the identifiable assets and liabilities acquired and the goodwill recognised are:
Property, plant and equipment (note 9)
Intangible assets – trade name (note 8)
Intangible assets – customer relationships (note 8)
Deferred tax liability (note 16)
Right-of-use assets (note 10)
Inventory
Trade and other receivables
Cash
Trade and other payables
Lease liabilities (note 10)
Net identifiable assets acquired
Less: non-controlling interest
Goodwill (note 8)
Net assets acquired
£m
21.9
21.0
66.7
109.6
£m
8.4
16.8
3.4
(1.5)
14.9
14.3
4.0
1.4
(9.1)
(14.9)
37.7
(0.6)
72.0
109.1
The goodwill recognised is principally made up of the value of the assembled workforce and the value to be derived from recently-opened
stores that have not yet reached maturity. It will not be deductible for tax purposes.
Measurement of non-controlling interest
The Group has elected to recognise the non-controlling interest in Toolstation Europe Limited at its proportionate share of the acquired
identifiable assets and liabilities.
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Travis Perkins plc Annual Report and Accounts 2020
Other information
Revenue and profit contribution
In 2020 the acquired business contributed revenue of £11.2m and a net loss of £4.6m to the Group results. If the acquisition had occurred on
1 January 2019, the Group revenue for the year ended 31 December 2019 would have been £38.8m higher and the Group profit would have
been £18.5m lower.
Outflow of cash to acquire subsidiary, net of cash acquired:
Cash consideration
Less: cash acquired
Net outflow of cash – investing activities
£m
21.9
(1.4)
20.5
f. Other business combinations and investment activity in 2019
On 2 January 2019 the Group acquired the remaining 25% of the issued share capital of National Shower Spares Limited for cash consideration
of £1.3m. National Shower Spares Limited is now a wholly-owned subsidiary.
On 15 January 2019 the Group acquired the trade and assets of Ambient Electrical Limited, an online retailer of electric underfloor heating
products, for cash consideration of £1.0m, generating goodwill of £0.8m.
On 17 May 2019 the Group acquired an additional 35% of the issued share capital of the Underfloor Heating Store Limited for cash
consideration of £18.5m. This took the Group’s ownership to 90% of the issued share capital of this subsidiary. As a result of this transaction,
the amount of non-controlling interest recognised in the Group’s equity was reduced by £6.8m.
32. Staff costs
a. Average number of persons employed
The average monthly number of persons employed (including Executive Directors):
No.
Sales and distribution
Administration
b. Aggregate remuneration
£m
Staff costs – wages and salaries
Staff costs – social security costs
Staff costs – other pension costs (note 18)
Share-based payments (note 33)
2020
27,912
1,376
29,288
2020
728.6
70.9
23.0
17.3
839.8
2019
28,544
1,515
30,059
2019
790.0
66.7
25.0
23.0
904.7
Director’s remuneration, including pension contributions and Long Term Incentive (LTI) plan awards, is set out in the Single Total Figure of
Remuneration table in the Directors’ Remuneration report on page 108.
The total amounts received or receivable by directors under long term incentive schemes in respect of qualifying service in the year is
£275,000 (2019: £1,298,000). The aggregate of gains made by the directors in the year on the exercise of share options equated to
£8,000 (2019: £34,000).
Details with respect to share options exercised in the year are set out on page 113.
Travis Perkins plc Annual Report and Accounts 2020
175
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
People
33. Share-based payments
Accounting policy
The Group issues equity-settled share-based payments to colleagues (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.
a. Fair value of options
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:
£m
Share price at grant date (pence)
Option exercise price (pence)
Volatility (%)
Option life (years)
Risk-free interest rate (%)
Expected dividends as a dividend yield (%)
Executive
options
1,148.5
1,143.5
42.5%
2.2
(0.1%)
2.5%
2020
SAYE
1,204.0
898.0
40.7%
3.9
(0.0%)
2.5%
Nil price
options
1,110.8
–
42.5%
2.2
(0.1%)
2.5%
Executive
options
1,294.0
1,405.5
32.2%
2.2
0.7%
3.7%
2019
SAYE
–
–
–
–
–
–
Nil price
options
1,249.2
–
31.8%
2.3
0.7%
3.7%
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 three years.
If options remain unexercised after a period of ten years from the date of grant, these options expire. Options are forfeited if the colleague leaves
the Group before options vest. SAYE options vest after three or five years and expire three and a half or five and a half 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.
b. Income statement charge and shares granted
A description of the share schemes operated by the Group is contained in the remuneration report on pages 93 to 96. The estimated fair values
of the shares under option granted under the Group’s share schemes in 2020 are as follows:
Share scheme
Co-investment plan (Nil price options)
Performance share plan (Approved scheme - executive options, unapproved scheme - nil price
options)
Deferred share bonus plan (Nil price options)
SAYE
Grant date
22 September 2020
14 September 2020
14 September 2020
8 October 2020
Fair value for
the Group
£m
5.8
9.9
1.7
15.0
The Group charged £15.6m (2019: £23.0m) to the income statement in respect of equity-settled share-based payment transactions.
176
Travis Perkins plc Annual Report and Accounts 2020
c. Share options for the Group
The number and weighted average exercise price of share options is as follows:
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
2020
Number
of options
4,356
(874)
(554)
3,304
6,233
225
The Group
Number
of nil price
options
3,597
(429)
(454)
1,550
4,265
304
Weighted
average
exercise price
(pence)
1,152
1,225
1,499
1,407
1,092
1,401
2019
Number
of options
6,221
(1,462)
(522)
119
4,356
162
Weighted
average
exercise price
(pence)
1,092
1,081
1,167
908
947
1,563
Details of the options outstanding at 31 December 2020 are as follows:
Range of exercise prices (pence)
Weighted average exercise price (pence)
Number of shares (thousands)
Weighted average expected remaining life (years)
Weighted average contractual remaining life (years)
Executive
options
2020
SAYE
743-1,958 898-1,616
926
5,798
2.3
2.4
1,298
347
1.4
8.3
The Group
Nil price
options
Executive
options
2019
SAYE
– 473–1,958 909–1,616
1,069
–
4,054
4,373
1.9
1.2
2.4
8.3
1,420
291
1.2
8.0
Other information
Number
of nil price
options
3,508
(467)
(619)
1,176
3,598
163
Nil price
options
–
–
3,737
1.6
8.2
d. Impact of vesting and exercise
If all 0.3m outstanding executive options vest and then are exercised on the date of vesting, or in the case of SAYE all 5.2m shares are acquired
on the first possible day 5.5m of shares will be issued for a consideration of £52.3m in the years below:
Options
SAYE
2021
2022
2023
2024
2025
No. m
0.1
0.2
£m
0.9
3.0
No. m
0.1
1.8
£m
1.3
17.1
No. m
0.1
0.1
£m
1.6
1.0
No. m
£m
No. m
–
3.0
–
27.4
–
–
£m
–
–
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 seven 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.
34. Key management personnel
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.
£m
Short-term employee benefits
Post-employment benefits
Share-based payments
2020
11.3
0.4
7.8
19.5
2019
12.5
0.3
14.1
26.9
Travis Perkins plc Annual Report and Accounts 2020
177
Financial statementsGovernanceStrategic report Notes to the consolidated financial statements continued
For the year ended 31 December 2020
People continued
35. Related party transactions
The Group has a related party relationship with its subsidiaries, its Directors and with its pension schemes (note 18). Transactions between
Group companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
The Group advanced a total of nil (2019: £20.6m) to all the Group’s associate companies in 2020. Operating transactions with the associates
during the year were not significant.
Other
36. Impact of new standards and interpretations
A number of new or amended standards became applicable for the current reporting period and as a result the Group has applied the following
standards:
• Amendments to References to Conceptual Framework in IFRS Standards
• Definition of a Business (Amendments to IFRS 3)
• Definition of Material (Amendments to IAS 1 and IAS 8)
•
Interest Rate Benchmark Reform; Phase 1 amendments to IFRS 9, IAS 39 and IFRS 7
The above requirements did not have a material impact on the Group and have been adopted without restating comparatives.
Interest Rate Benchmark Reform; Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
At the date of the approval of these financial statements, the following standards and interpretations, which have not been applied in these
financial statements, were in issue, but not yet effective:
• Covid-19 Related rent concessions (Amendments to IFRS 16)
•
• Onerous Contracts - cost of fulfilling a contract (Amendments to IAS 37)
• Annual Improvements to IFRS Standards 2018-2020
• Classification of Liabilities as Current or Non-current (Amendments to IAS1)
•
• Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
IFRS 17 – Insurance Contracts.
Based on the initial assessment, 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.
178
Travis Perkins plc Annual Report and Accounts 2020
Company balance sheet
As at 31 December 2020
£m
Assets
Non-current assets
Tangible assets
Interest in associates
Investment in subsidiaries
Investments
Deferred tax asset
Total non-current assets
Current assets
Debtors
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Issued capital
Share premium account
Merger reserve
Own shares
Other reserve
Accumulated profits
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Amounts due to subsidiaries
Total non-current liabilities
Current liabilities
Derivative financial instruments
Amounts due to subsidiaries
Other creditors
Total current liabilities
Total liabilities
Total equity and liabilities
Other information
Notes
2020
2019
(restated – note 14)
2
3
4
5
6
7
8
9
8
10
0.2
–
2,726.9
6.7
4.5
2,738.3
1,317.6
461.1
1,778.7
4,517.0
25.2
544.3
326.5
(39.5)
–
2,191.6
0.1
0.1
3,589.5
4.7
3.9
3,598.3
731.3
96.0
827.3
4,425.6
25.2
544.3
326.5
(50.8)
(4.1)
931.9
3,048.1
1,773.0
545.6
744.7
1,290.3
1.6
160.0
17.0
178.6
1,468.9
4,517.0
551.8
2,076.9
2,628.7
2.5
–
21.4
23.9
2,652.6
4,425.6
The Company’s profit for the year was £1,253.4m (2019 (restated – note 14): £335.0m).
The financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on 1 March 2021 and signed
on its behalf by:
Nick Roberts
Director
Alan Williams
Director
Travis Perkins plc Annual Report and Accounts 2020
179
Financial statementsGovernanceStrategic report
Company statement of changes in equity
For the year ended 31 December 2020
£m
At 1 January 2019
Profit and total comprehensive income for the year
(restated - note 14)
Dividends
Dividend equivalent payments
Purchase of own shares
Own shares movement
Equity-settled share-based payments
Tax on equity-settled share-based payments
Options on non-controlling interest
Share
capital
25.2
Share
premium
544.3
Merger
reserve
326.5
Own shares
(47.8)
Other
(5.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7.7)
4.7
–
–
–
–
–
–
–
–
–
–
1.5
Retained
earnings
693.2
335.0
(116.2)
(0.1)
–
(4.7)
23.0
1.7
–
Total equity
1,535.8
335.0
(116.2)
(0.1)
(7.7)
–
23.0
1.7
1.5
At 31 December 2019 - Restated (note 14)
25.2
544.3
326.5
(50.8)
(4.1)
931.9
1,773.0
Profit and total comprehensive income for the year
Purchase of own shares
Own shares movement
Equity-settled share-based payments
Tax on equity-settled share-based payments
Options on non-controlling interest
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6.4
4.9
–
–
–
At 31 December 2020
25.2
544.3
326.5
(39.5)
–
–
–
–
–
4.1
–
1,253.4
–
(4.9)
15.6
(0.3)
(4.1)
1,253.4
6.4
–
15.6
(0.3)
–
2,191.6
3,048.1
180
Travis Perkins plc Annual Report and Accounts 2020
Notes to the Company’s financial statements
For the year ended 31 December 2020
Other information
General information
Overview
Travis Perkins plc is the ultimate parent of the Travis Perkins plc Group (“the Group”). The nature of the Group’s operations and its principal
activities are set out in the Strategic Report on pages 3 to 73. The Company is incorporated in the United Kingdom under the Companies Act
2006. The address of the registered office is given on page 192.
These financial statements are presented in pounds sterling, the currency of the primary economic environment in which the Group operates.
Basis of accounting
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 and as such these financial statements have
been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). In preparing these financial
statements, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in
conformity with the requirements of the Companies Act 2006, but makes amendments where necessary in order to comply with Companies
Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
As permitted by section 408 of the Companies Act 2006, the income statement of the Company has not been presented.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
• The requirements of IFRS 2 Share Based Payments in respect of group settled share-based payments;
• The requirements of IFRS 7 “Financial Instruments: Disclosures”
• The requirements of paragraphs 91 to 99 of IFRS 13 “Fair Value Measurement”
• The requirement in paragraph 38 of IAS 1 “Presentation of Financial Statements” to present comparative information in respect of paragraph
79(a)(iv) of IAS 1
• The requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134 to 136 of IAS 1 “Presentation of
Financial Statements”
• The requirements of IAS 7 “Statement of Cash Flows”
• The requirements of paragraphs 30 and 31 of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Error”
• The requirements of paragraphs 17 and 18A of IAS 24 “Related Party Disclosures”
• The requirements in IAS 24 “Related Party Disclosures” to disclose related party transactions entered into between two or more members of
a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member
• The requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 “Impairment of Assets”.
Where required, equivalent disclosures are given in the consolidated financial statements of Travis Perkins plc.
Transition to FRS 101
This is the first year that the Company has presented its financial statements under Financial Reporting Standard 101, “Reduced Disclosure
Framework” (“FRS 101”) issued by the Financial Reporting Council. The last financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRS”) adopted by the European Union for the year ended 31 December 2019 and the date of
transition to FRS 101 was 1 January 2020. There were no transition adjustments.
Basis of preparation
The financial statements have been prepared on the historic cost basis, except that derivative and other financial instruments and contingent
consideration arising from business combinations are stated at fair value through profit and loss and also designated financial instruments are
stated at fair value through other comprehensive income.
Foreign currencies
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.
Going concern
After making enquiries, in particular in light of the unprecedented circumstances that have arisen since the outbreak of the Covid-19
pandemic, the Directors have formed a judgement at the time of approving the financial statements, that there is a reasonable expectation
that the Company has adequate resources to continue in operational existence for 12 months from the date of signing these accounts.
Furthermore, the Directors have concluded that there is not a material uncertainty that casts significant doubt upon the Company’s ability to
continue as a going concern.
For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Detailed considerations of going concern and principal risks and uncertainties are provided in the Annual Report on pages 82 and
44 to 51 respectively.
Travis Perkins plc Annual Report and Accounts 2020
181
Financial statementsGovernanceStrategic report
Notes to the Company’s financial statements continued
For the year ended 31 December 2020
General information continued
Significant accounting policies
The principal accounting policies adopted in preparing the financial statements are provided throughout the notes to the financial statements.
Standards issued but not yet effective
New standards, amendments and interpretations which are in issue but not yet effective are not expected to have a material impact on the
Company’s financial statements.
Key judgements and estimates
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 and current and expected economic conditions. The Directors frequently re-evaluate these significant factors and make
adjustments as facts and circumstances dictate. Key estimates which are material to the financial statements are:
Page
183
Note
Description
2
Carrying value of investments in subsidiaries
Income statements disclosures
1.
The audit fee for the Company and the consolidated financial statements is disclosed in note 4c of the Group consolidated financial statements.
Fees payable to KPMG LLP for audit and non-audit services to the Company are not required to be disclosed because the Group financial
statements disclose such fees on a consolidated basis. Details of the Company’s policy on the use of auditors for non-audit services, the
reasons why the auditor was used rather than another supplier and how the auditor’s independence and objectivity were safeguarded are set out
in the Audit Committee Report on pages 87 to 92
Dividend disclosures are provided in note 21 to the consolidated financial statements.
Staff costs (including Directors):
£m
Wages and salaries
Social security costs
Other pension costs
Share-based payments (note 12)
The average monthly number of persons employed including Directors during the year was 60 (2019: 52).
2. Investments in subsidiaries
Accounting policy
Investments in subsidiaries are carried at cost less impairment.
£m
Cost
At 1 January
Additions
Disposals
At 31 December
Provision for impairment
Net book value at 31 December
2020
6.9
0.8
0.2
7.0
14.9
2019
7.1
0.9
0.1
10.7
18.8
2020
2019
3,945.7
106.1
(3.9)
4,047.9
(1,321.0)
2,726.9
3,894.9
79.4
(28.6)
3,945.7
(356.2)
3,589.5
The additions to investments in 2020 represent the capitalisation of a £73.3m intercompany loan with Toolstation Europe and other additions
as part of the Group’s ongoing project to simplify the legal structure.
During 2020 the Company sold its investment in Tile Giant Limited (note 31 to the Group accounts), generating a profit on disposal of £0.7m.
As a result of the ongoing simplification of the Group, there has been a reduction to the net asset value of certain non-trading subsidiaries,
following distribution from these entities, and they no longer supported the carrying value of the Company’s investment. As a result the
Company recognised impairments of £964.8m (2019: £19.6m).
During 2019 the Company sold its investments in National Shower Spares Limited, KA Venture Limited and the Underfloor Heating Store
Limited to other Group companies at book value for consideration left as intercompany balance.
182
Travis Perkins plc Annual Report and Accounts 2020
Other information
A full listing of all related undertakings is provided in note 13.
Key estimate - carrying value of investment in subsidiaries
In assessing the carrying value of investment in subsidiaries, the recoverable amount of each investment is determined by reference to the
value-in-use. The Company’s investment in Wickes Group Limited of £768.5m is subject to the same estimates and sensitivities as apply to the
Wickes CGU in the Group’s consolidated accounts. See note 28 in the consolidated financial statements for details of these.
3. Investments
£m
Equity investments designated as FVTPL: shares held in invested entities
Loans receivable at amortised cost: loans to invested entities
2020
3.0
3.7
6.7
2019
1.0
3.7
4.7
4. Deferred tax
£m
Liability/(asset):
Share-based payments
Other timing differences
At 1 Jan
2019
Recognised
in income
Recognised
in equity
At 1 Jan
2020
Recognised
in income
Recognised
in equity
At 31 Dec
2020
1.1
0.4
1.5
0.7
–
0.7
1.7
–
1.7
3.5
0.4
3.9
0.9
–
0.9
(0.3)
–
(0.3)
4.1
0.4
4.5
5. Debtors
Accounting policy
Debtors are originally recognised at fair value. Subsequent to the initial recognition they are measured at amortised cost using the effective
interest rate method.
£m
Current:
Amounts owed by subsidiaries
Other financial assets - loan notes
Other debtors
2020
2019
1,261.4
2.8
53.4
1,317.6
655.3
–
76.0
731.3
Amounts owed by subsidiaries include loans and other balances. The loans are interest-free and repayable on demand.
6. Share capital and reserves
Accounting policy
Equity instruments represent the ordinary share capital of the Company and are recorded at the proceeds received, net of directly attributable
incremental issue costs.
a. Share capital
Ordinary shares of 10p (authorised, issued and fully paid)
At 1 January 2019
Allotted under share option schemes
At 1 January 2020
Allotted under share option schemes
At 31 December 2020
No.
252,143,923
–
252,143,923
–
252,143,923
£m
25.2
–
25.2
–
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.
b. Own shares
No.
At 1 January
Acquired
Reissued
At 31 December
2020
2019
3,944,144
–
(1,065,123)
3,803,831
1,000,000
(859,687)
2,879,021
3,944,144
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.
Travis Perkins plc Annual Report and Accounts 2020
183
Financial statementsGovernanceStrategic report Notes to the Company’s financial statements continued
For the year ended 31 December 2020
6. Share capital and reserves continued
c. Reserves
A description of the nature and purpose of each reserve is given below:
• The share premium represents the amounts above the nominal value received for shares sold
• The merger reserve represents the premium on equity instruments issued as consideration for the acquisition of BSS
• 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
• Retained earnings represents cumulative results for the Company.
Distributable reserves
The distributable reserves accessible to the Company approximate total of its accumulated profits of £2,191.6m (2019 restated (see note 14)
£931.9m). When required the Company can receive dividends from its subsidiaries to increase the available distributable reserves.
Interest bearing loans and borrowings
7.
Accounting policy
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.
£m
Sterling bonds
Finance charges netted off borrowings
Current liabilities
Non-current liabilities
£m
Borrowings repayable:
More than one year, but not more than five years
More than five years
Unamortised fees
2020
550.0
(4.4)
545.6
–
545.6
545.6
2019
555.8
(4.0)
551.8
–
551.8
551.8
2020
2019
550.0
–
(4.4)
545.6
555.8
–
(4.0)
551.8
At 31 December 2020 all borrowings were denominated in sterling (2019: sterling).
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.
Assets:
Short-term deposits
Liabilities:
£250m sterling bond
£300m sterling bond
2020
Effective
interest
rate
0.8%
3.8%
4.5%
£m
455.0
250.0
300.0
550.0
Details of the sterling bonds are given in note 22 to the consolidated financial statements.
8. Amounts due to subsidiary undertakings
£m
Amounts due to subsidiary undertakings - non current
Amounts due to subsidiary undertakings - current
2019
Effective
interest
rate
0.8%
4.4%
4.5%
£m
140.0
255.8
300.0
555.8
2020
744.7
160.0
904.7
2019
(restated – note 14)
2,076.9
–
2,076.9
Amounts due to subsidiary undertakings relate to loans and other balances. These loans are interest-free except for a £170m loan bearing
interest at 1.2% above the base rate and a £100.3m loan bearing interest at 1.4% above the 12 month LIBOR rate. Except for £160.0m that is
due for settlement within 12 months of 31 December 2020, the remaining amounts due to subsidiary undertakings are not due for repayment
within 12 months of the balance sheet date and are non-current.
184
Travis Perkins plc Annual Report and Accounts 2020
9. Financial instruments
a. The carrying value of categories of financial instruments
£m
2020
2019
Other information
Financial assets:
Mandatorily at FVTPL
Loans and receivables (including cash and cash equivalents) at amortised cost
Designated instrument-by-instrument as either FVTPL or FVOCI
Financial liabilities:
Mandatorily at FVTPL
Borrowings (note 7)
Put options on non-controlling interests
Trade and other payables at amortised cost
2.8
1,726.2
3.0
1,732.0
1.6
545.6
–
920.3
1,467.5
–
755.3
1.0
756.3
0.7
551.8
1.8
2,097.4
2,651.7
b. Liquidity analysis
The following table details the Company’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.
£m
0–1 year
1–2 years
2–5 years
5+ years
2020
Total gross settled: foreign exchange forward contracts
Total derivative financial instruments
Net settled:
Borrowings
Trade and other payables at amortised cost
Total financial instruments
(1.6)
(1.6)
–
(15.6)
(15.6)
–
–
–
–
–
–
–
(545.6)
–
(545.6)
2019
–
–
–
–
–
£m
0–1 year
1–2 years
2–5 years
5+ years
Total gross settled: foreign exchange forward contracts
Net settled:
Put options on non-controlling interests
Total derivative financial instruments
Net settled:
Borrowings
Trade and other payables at amortised cost
Total financial instruments
(0.7)
(1.8)
(2.5)
–
(20.5)
(20.5)
–
–
–
–
–
–
–
–
–
(551.8)
–
(551.8)
–
–
–
–
–
–
Total
(1.6)
(1.6)
(545.6)
(15.6)
(561.2)
Total
(0.7)
(1.8)
(2.5)
(551.8)
(20.5)
(572.3)
10. Other creditors
Accounting policy
Other creditors are measured at amortised cost. The Company has financial risk management policies in place to ensure that all payables are
paid within the credit time frame.
£m
Other creditors
Accruals
2020
15.6
1.4
17.0
2019
20.5
0.9
21.4
Travis Perkins plc Annual Report and Accounts 2020
185
Financial statementsGovernanceStrategic report Notes to the Company’s financial statements continued
For the year ended 31 December 2020
11. 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)
CCF Limited
City Plumbing Supplies Holdings Limited
Direct Heating Spares Limited
Keyline Civils Specialist Limited1
National Shower Spares Limited1
PTS Group Limited
Solfex Limited
The BSS Group Limited
The Cobtree Scottish Limited Partnership1
The Underfloor Heating Store Limited
Tools & Fasteners Solutions Limited
Toolstation Holdings Limited
Toolstation Limited
TP Property Company Limited
Travis Perkins Group Holdings Limited
Travis Perkins (Properties) Limited
Travis Perkins (PSL2015) 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 Group Holdings Limited
Travis Perkins P&H Holdings Limited
Travis Perkins P&H Partner Limited
Travis Perkins Trading Company Limited
Wickes Building Supplies Limited9
Wickes Group Holdings Limited9
Wickes Group Limited9
Wickes Properties Limited
Dormant & non-trading subsidiary companies
(100% ownership and UK registered)
B. & G. (Heating & Plumbing) Limited Baird
Lindsay Limited1
Baird Lindsay Limited
Benchmarx Kitchens and Joinery Limited
BMSS Limited
Boston (2011) Limited
British Steam Specialties (International)
Limited (The)
Bss (UK) Limited
BSS GPS Trustee Limited
Builders Mate Limited
Built For Trade Limited
Burt Boulton (Timber) Limited
Chandler Forest Products Limited
Christie & Vesey Limited
City Plumbing Supplies Limited
Cobtree Nominees Limited
Curran Sawmills Limited (The)5
Downpatrick Timber Slate and Coal
Company Limited5
E. East & Son Limited13
Elecnation Limited
Fry & Pollard Limited
Gammon & Smith Limited
Garratt Timber Supplies Limited
Gestion Toolstation inc.12
Grundy & Pilling Limited
Harrison Trenery Limited
HT (1995) Limited
HTG (1996) Limited
Hunter Limited
Hunter Estates Limited
IJM Enterprises Limited
IJM Holdings Limited
J T Stanton & Co. Limited
John Dove & Co. Limited
KA Venture Limited
Kisling Limited
M & H (North East) Limited
Malden Timber (West) Limited
May & Hassell (Cumbria) Limited
May & Hassell (Scotland) Limited1
May & Hassell Limited
MD (1995) Group Limited1
MD (1995) Limited
MD (Park Street) Limited
MD-DOR3 Limited
MD-DOR4 Limited
Monteith Building Services Limited1
Norman Mackenzie (Building Supplies)
Limited1
P.T.S. Plumbing Trade Supplies Limited
Primaflow (Birmingham) Limited
Property Newco Two Limited
R A Thomas (Joinery) Limited
Rudridge Limited
Spendlove C. Jebb7
Terant Supplies Limited
TFS Holdings Limited
The BSS EBT Company Limited
Tile Giant Holdings Limited
TP Directors Ltd
TP General Partner (Scotland) Limited1
TP Shelfco No.2 Limited
TP Shelfco No.3 Limited
TPG Management Services Limited
Travis & Arnold Limited
Travis Perkins Capital Partner Limited
Travis Perkins Financing Company No.3
Limited
Travis Perkins Installation Services Limited
Travis Perkins Merchant Holdings Limited
Travis Perkins Plumbing & Heating LLP
Tricom Group Limited
Tricom Supplies Limited
UGS Limited
Vaner Holdings Limited
Wickes Developments Limited
Wickes Finance Limited
Wickes Group Trustees Limited
Wickes Holdings Limited9
Wickes Retail Sourcing Limited
William Bloore & Son Limited
186
Travis Perkins plc Annual Report and Accounts 2020
Other information
Other subsidiary companies
Company Name
BSS (Ireland) Limited3
City Investments Limited4
Toolexpert Benelux BV8
Toolstation BV8
Toolstation16
Toolstation Europe BV8
Toolstation Europe Limited
Toolstation GmbH14
Toolstation Netherlands BV8
Toolstation SAS15
Travis Perkins Hong Kong Limited10
Travis Perkins Sourcing (Shanghai) Ltd11
Investments
Company Name
The Mosaic Tile Company Limited2
Independent Construction Technologies Limited6
P H Properties Limited6
Staircraft Group Limited6
Staircraft Integrated Solutions Limited6
Registered
% Ownership
Ireland
Jersey
Netherlands
Netherlands
Belgium
Netherlands
United Kingdom
Germany
Netherlands
France
Hong Kong
China
100
100
97
97
97
97
97
97
97
97
100
100
Registered
% Ownership
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
34
15
15
15
15
Status
Active
Dormant
Active
Active
Active
Active
Active
Dormant
Active
Active
Active
Active
Status
Active
Active
Active
Active
Active
50 Mauchline Street, Glasgow, G5 8HQ, United Kingdom
107–127 Grosvenor Road, Belfast, BT12 4GT, United Kingdom
Registered offices (not Lodge Way House)
1
2 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 Touwbaan 40, 2352CZ Leiderdorp, Netherlands
9 Vision House, 19 Colonial Way, Watford, United Kingdom, WD24 4JL
10 Suite 2401, 24/F, China Insurance Group Building, 141 Des Voeux Road, Central, Hong Kong
11 Building No.17, No. 800 Changde Road, JingAn District, Shanghai 200040
12 5303 boul. Saint-Laurent, Montréal Québec H2T1S5, Canada
13 43–45 Chiltern Avenue, Woodside Road, Amersham, Bucks, HP6 5AF
14 Regus Building, Kranhaus 1, Business Centre GmbH Co KG, Im Zollhafen 18, 50678 Koln, Germany
15 61 Route de Grenoble, 69800 Saint Priest, Lyon, France
16 Boomsesteenweg 58, 2630 Aarlselaar, Belgium
12. Share-based payments
The Company operates a number of share incentive plans. A description of the share schemes operated by the Group, including that of the
Company, is contained in the remuneration report on page 92 and pages 95 to 97 and in note 33 to the consolidated financial statements.
Travis Perkins plc Annual Report and Accounts 2020
187
Financial statementsGovernanceStrategic report Notes to the Company’s financial statements continued
For the year ended 31 December 2020
13. Related party transactions
The Company has a related party relationship with its subsidiaries, its Directors and with its pension schemes. 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 95 to 97. Other than the payment of remuneration
there have been no related party transactions with Directors.
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 £7.2m (2019: £17.2m)
• Receiving annual dividends totalling £2,256.3m (2019 restated – note 14: £411.1m)
Details of balances outstanding with subsidiary companies are shown in notes 5 and 8 and in the balance sheet on page 179.
14. Prior year restatement
During 2020 it was identified that an intercompany dividend received by the Company as part of the ongoing simplification of the legal
structure of the Travis Perkins Group had not been correctly recorded in the Company’s results for the year ended 31 December 2019. A written
resolution was executed to settle the intercompany receivable arising from the declaration of the dividend by offset of outstanding intercompany
payables, as a result the profit for the year was understated by £331.1m and amounts owed to subsidiaries was overstated by £331.1m. This
adjustment has no impact on the Group’s consolidated results, cashflows or balance sheet reported for 2019.
A prior year restatement has been recorded and the impact is shown below:
£m
Assets
Non-current assets
Tangible assets
Interest in associates
Investment in subsidiaries
Investments
Deferred tax asset
Total non-current assets
Current assets
Debtors
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Issued capital
Share premium account
Merger reserve
Own shares
Other reserve
Accumulated profits
Equity attributable to owners of the Company
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Amounts due to subsidiaries
Total non-current liabilities
Current liabilities
Derivative financial instruments
Other creditors
Total current liabilities
Total liabilities
Total equity and liabilities
188
Travis Perkins plc Annual Report and Accounts 2020
2019
(previously reported)
Effect of
restatement
2019
(restated)
0.1
0.1
3,589.5
4.7
3.9
3,598.3
731.3
96.0
827.3
4,425.6
25.2
544.3
326.5
(50.8)
(4.1)
600.8
1,441.9
1,441.9
551.8
2,408.0
2,959.8
2.5
21.4
23.9
2,983.7
4,425.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
331.1
331.1
331.1
–
(331.1)
(331.1)
–
–
–
(331.1)
–
0.1
0.1
3,589.5
4.7
3.9
3,598.3
731.3
96.0
827.3
4,425.6
25.2
544.3
326.5
(50.8)
(4.1)
931.9
1,773.0
1,773.0
551.8
2,076.9
2,628.7
2.5
21.4
23.9
2,652.6
4,425.6
C_GEN_PageC_GEN_PageL2C_GEN Section Other information
Other information
Other information
Other information
190 Five year summary
192 Other shareholder information
Travis Perkins plc Annual Report and Accounts 2020
189
Financial statementsGovernanceStrategic reportC_GEN_PageC_GEN_PageL2C_GEN Section Five-year summary
2020
£m
6,157.5
226.7
(9.2)
(140.4)
77.1
–
0.5
(85.3)
(7.7)
(6.4)
(7.8)
(21.9)
(8.8p)
42.4p
-
2019
£m
2018
£m
2017
£m
6,955.7
6,740.5
6,433.1
441.5
(9.0)
(200.4)
232.1
40.3
(4.3)
(87.3)
180.8
(27.1)
(30.9)
122.8
48.9
112.7p
48.5p
1,976
29,288
2,154
30,059
2020
£m
226.7
(11.5)
215.2
89.6
16.6
15.6
194.6
(28.2)
(59.0)
(44.5)
(107.7)
11.9
304.1
2019
£m
441.5
(20.6)
420.9
97.5
23.5
19.9
(128.7)
(26.2)
(57.0)
(52.9)
(120.9)
19.4
195.5
374.5
(9.5)
(386.7)
(21.7)
–
(4.0)
(23.7)
(49.4)
–
(34.1)
(83.5)
(34.4p)
114.5p
47.0p
2,091
29,748
2018
£m
374.5
(26.8)
347.7
102.0
15.5
19.6
(107.1)
(25.5)
–
(55.1)
(143.1)
13.8
167.8
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
30,251
2017
£m
380.1
(29.4)
350.7
102.0
12.6
15.6
(76.5)
(27.1)
–
(57.2)
(166.0)
–
154.1
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
45p
2,053
29,814
2016
£m
409.0
(17.0)
392.0
97.6
7.5
17.5
4.9
(22.2)
–
(104.7)
(161.0)
–
231.6
Five-year summary
Consolidated income statement
Revenue
Operating profit before amortisation
and adjusting items
Amortisation
Adjusting items – operating
Operating profit
Adjusting items – business acquisitions
Share of associates' results
Net finance costs
(Loss) / profit before tax
Adjusting items – deferred tax
Income tax expense
Net (loss)/profit
Basic (loss) / earnings per share
Adjusted earnings per share
Dividend declared per ordinary share
Number of branches at 31 December
(includes branches of associates)
Average number of colleagues
Consolidated free cash flow statement
Adjusted operating profit
Less: Profit on disposal of properties
Adjusted operating profit excluding property profit
Depreciation of property, plant and equipment
Amortisation of internally generated intangibles
Share-based payments
Movement on working capital
Other net interest paid
Interest on lease liabilities
Income tax paid
Capital expenditure excluding freehold purchase
Disposal of plant and equipment
Free cash flow
190
Travis Perkins plc Annual Report and Accounts 2020
C_GEN_PageL2C_GEN Section Consolidated balance sheet
Assets
Non-current assets
Property, plant and equipment
Goodwill and other intangible assets
Right-of-use assets
Interest in associates
Other receivables
Retirement benefit asset
Investment property and other investments
Current assets
Inventories
Trade and other receivables
Tax debtor
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
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
Lease liability
Derivative financial instruments
Retirement benefit obligations
Long-term provisions and other payables
Deferred tax liabilities
Current liabilities
Interest-bearing loans and borrowings
Lease liability
Derivative financial instruments
Trade and other payables
Tax liabilities
Short-term provisions
Total liabilities
Liabilities held for sale
Total equity and liabilities
Other information
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
830.4
1,670.5
1,145.5
–
–
178.4
9.2
840.7
892.7
6.5
–
505.6
–
6,079.5
25.2
545.6
326.5
(39.5)
15.5
1,840.5
2,713.8
–
2,713.8
575.7
1,168.3
–
–
21.9
77.2
–
158.8
1.6
1,304.2
–
58.0
3,365.7
–
6,079.5
882.0
1,691.7
1,276.8
1.9
–
57.5
6.7
937.8
1,239.7
–
–
207.9
138.0
6,440.0
25.2
545.6
326.5
(50.8)
13.6
1,722.6
2,582.7
4.4
2,587.1
583.3
1,253.6
–
4.9
8.0
62.7
–
158.7
2.5
1,613.9
13.4
60.4
3,761.4
91.5
6,440.0
913.2
1,674.6
–
34.2
43.3
81.2
6.6
855.3
1,253.8
–
–
255.4
–
5,117.6
25.2
545.4
326.5
(47.8)
9.1
1,847.5
2,705.9
11.8
2,717.7
605.2
–
0.9
–
18.4
77.8
3.8
4.7
1,603.2
25.9
60.0
2,399.9
–
5,117.6
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
2,860.3
612.1
–
4.9
28.3
17.1
61.0
6.2
1.2
1,453.6
44.5
52.6
2,281.5
–
5,141.8
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
2,655.6
621.1
–
–
127.3
21.2
45.8
6.9
–
1,348.3
43.8
57.0
2,271.4
–
4,927.0
Travis Perkins plc Annual Report and Accounts 2020
191
Financial statementsGovernanceStrategic reportC_GEN_PageC_GEN_PageL2C_GEN Section Other shareholder information
Financial diary
Annual General Meeting
27 April 2021
Annual General Meeting (“AGM”)
The AGM will be held on 27 April 2021 at: 9:30am
Registrars
For information about shareholdings and dividends and to report
changes to your address, bank details or any other account
information please contact the Company’s registrars:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Shareholder portal: www.travisperkins-shares.com
Email: enquiries@linkgroup.co.uk
Telephone: +44 (0) 371 664 0300*
Shareholder portal
You can view and manage your shareholder account online via the
shareholder portal 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 www.travisperkins-shares.com or you
can contact Link Group and they will send you the relevant form
to complete.
Shareholder communications
Company website
Travis Perkins plc Annual and Interim Reports, results announcements
and presentations are available on the Investor Relations section of
our website 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 Report
The Annual Report is published on our website and a hard copy
will be posted to shareholders who have requested it. All other
shareholders will be 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 registered office:
Lodge Way House
Lodge Way
Harlestone Road
Northampton
NN5 7UG
Email: cosec@travisperkins.co.uk
Electronic shareholder communications
The Company prefers that you receive your shareholder
communications electronically. This is a faster, more environmentally-
friendly and more effective way to communicate with you. If you
have received a paper 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 www.travisperkins-shares.com.
Shareholder services
The Company’s registrars 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 Group
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 Link Asset Services on
+44 (0) 371 664 0381. Alternatively, you can sign up for this service on
the shareholder portal (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:
On-line dealing: www.linksharedeal.com
Telephone dealing: +44 (0) 371 664 0445*
These services are only available to private shareholders resident in
the UK.
* 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 with the exception of
share-dealing lines which are open from 8.00am to 4.30pm.
192
Travis Perkins plc Annual Report and Accounts 2020
2020
Thank you
I reflect on 2020 with great pride in the commitment,
professionalism and tenacity of all our colleagues
across the Group and their determination to support
our customers, suppliers and the communities. The
courage of all colleagues through successive periods
of the pandemic has enabled the construction industry,
a vital part of the national economy, to continue safely.
Nick Roberts
Chief Executive Officer
This report is printed on UPM Fine offset, a paper which is
certified by the Forest Stewardship Council®. UPM Fine is
manufactured from hardwood and softwood pulp to the
certified environmental management system ISO 14001
Printer is also ISO 14001 certified, CarbonNeutral & Alcohol
Free.
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Travis Perkins plc
Lodge Way House, Harlestone Road,
Northampton. NN5 7UG
01604 752424
www.travisperkinsplc.com