DJ Travis Perkins: Interim results for the six months ended 30 June 2019: Good strategic progress underpinned by strong trading performance
Travis Perkins (TPK)
Travis Perkins: Interim results for the six months ended 30 June 2019: Good strategic
progress underpinned by strong trading performance
31-Jul-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to
REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Travis Perkins plc
Interim results for the six months ended 30 June 2019
Good strategic progress underpinned by strong trading performance
GBPm Note H1 2019 H1 2018 H1 2018 Change vs.
illustrati
ve
comparativ
Restated(1) IFRS 16(2) es
Revenue 2,771 2,591 2,591 6.9%
Like-for-like 8.0% 0.2% 0.2% 7.8ppt
revenue growth(3)
Adjusted 17a 195 156 170 14.7%
operating
profit(3)
Adjusted earnings 8b 50.1p 46.3p 41.8p 19.9%
per share(3)
ROCE(3) 17f 9.8% 10.5% 9.0% 0.8ppt
Covenant net 13 (414) (409)
debt(3)
Dividend per 9 15.5p 15.5p
share
Operating profit 64 (104)
/ (loss)
Total profit / 12 (148)
(loss) after tax
Basic earnings 8a 6.9p (57.2)p
per share
(1) All figures except for profit after tax restated to exclude the Plumbing & Heating
division, which has been presented as a discontinuing operation
(2) Figures adjusted on a non-statutory illustrative basis for IFRS 16 - Leases as
previously reported in May 2019
(3) Alternative performance measures are used to provide a guide to underlying performance.
Details of calculations can be found in the notes listed
Financial highlights
· Continuing Group revenue increased by 6.9%, and by 8.0% on a like-for-like basis,
primarily driven by volume growth
· Continuing Group adjusted operating profit increased by 14.7% to GBP195m
· Strong performance across the Group - positive trading in Merchanting demonstrating
share gains, a strong recovery in Wickes and continued excellent growth in Toolstation
· Adjusting items of GBP127m including a GBP111m asset write off relating to the ERP
replacement programme
Strategic progress
· Merchant businesses benefitting from simplification and more empowered branch managers
· Process to divest the P&H business ongoing, classified as an asset held for sale
· Decision to demerge Wickes reflecting the Group's focus on advantaged trade businesses
and the simplification of the Group
· Cost actions delivering improved financial performance
John Carter, Chief Executive Officer, commented:
"I am delighted with the progress the Group has made in executing the strategy set out at
the capital markets event in December 2018; to focus on our advantaged trade businesses and
to simplify the Group. The P&H sales process is well underway, and we are today announcing
our intention to demerge Wickes as a separate business.
This strategic progress has been underpinned by a strong trading period in the first half
of 2019 albeit against softer trading conditions in H1 2018. Our trade merchanting
businesses have outperformed their markets, through continued focus on delivering excellent
customer service, and benefitting from the leaner, lower cost organisation now in place.
Toolstation continues to deliver excellent growth through proposition improvements and
network expansion. Wickes has delivered a strong turnaround in volume and profit
performance, with gains in both core DIY and through the Kitchen & Bathroom showroom.
Whilst our underlying markets remain subdued, the self-help initiatives underway are
supporting an encouraging improvement in performance and provide a strong platform to drive
sustainable growth ahead of our markets in the medium term. Despite a cautious outlook for
the near-term, the Group remains confident in making progress across the year as a whole."
Enquiries:
Travis Perkins Tulchan Communications
Graeme Barnes David Allchurch
+44 (0) 7469 401819 +44 (0) 207 353 4200
graeme.barnes@travisperkins.co.uk
Zak Newmark
+44 (0) 7384 432560
zak.newmark@travisperkins.co.uk
Cautionary Statement:
This announcement contains "forward-looking statements" with respect to Travis Perkins'
financial condition, results of operations and business and details of plans and objectives
in respect to these items. Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as "anticipates", "aims",
"due", "could", "may", "will", "should", "expects", "believes", "seeks", "intends",
"plans", "potential", "reasonably possible", "targets", "goal" or "estimates", and words of
similar meaning. By their very nature forward-looking statements are inherently
unpredictable, speculative and involve risk and uncertainty because they relate to events
and depend on circumstances that will occur in the future. There are a number of factors
that could cause actual results and developments to differ materially from those expressed
or implied by these forward-looking statements. These factors include, but are not limited
to, the Principal Risks and Uncertainties disclosed in the Group's Annual Report, changes
in the economies and markets in which the Group operates; changes in the legislative,
regulatory and competition frameworks in which the Group operates; changes in the capital
markets from which the Group raises finance; the impact of legal or other proceedings
against or which affect the Group; and changes in interest and exchange rates. All
forward-looking statements, made in this announcement or made subsequently, which are
attributable to Travis Perkins or any other member of the Group or persons acting on their
behalf are expressly qualified in their entirety by the factors referred to above. No
assurances can be given that the forward-looking statements in this document will be
realised. Subject to compliance with applicable law and regulations, Travis Perkins does
not intend to update these forward-looking statements and does not undertake any obligation
to do so. Nothing in this document should be regarded as a profits forecast.
Without prejudice to the above:
(a) neither Travis Perkins plc nor any other member of the Group, nor persons acting on
their behalf shall otherwise have any liability whatsoever for loss howsoever arising,
directly or indirectly, from the use of the information contained within this announcement;
and
(b) neither Travis Perkins plc nor any other member of the Group, nor persons acting on
their behalf makes any representation or warranty, express or implied, as to the accuracy
or completeness of the information contained within this announcement.
This announcement is current as of 31 July 2019, the date on which it is given. This
announcement has not been and will not be updated to reflect any changes since that date.
Past performance of the shares of Travis Perkins plc cannot be relied upon as a guide to
the future performance of the shares of Travis Perkins plc.
Summary
*******
The Group has reported its H1 2019 interim results on the following basis:
· The Plumbing & Heating business has been classified as a discontinuing operation due to
progress with the ongoing sale process.
· The Group is reporting its accounts under IFRS 16 - Leases for the first time, which
treats all lease obligations as debt, leading to changes in the income statement and
balance sheet. Illustrative comparatives have been presented as if IFRS 16 were in place
in 2018.
The Group has had a good start to the year, with revenue of the continuing Group increasing
by 6.9% to GBP2,771m, and by 8.0% on a like-for-like basis. Adjusted operating profits,
excluding property profits, grew by 18.1% to GBP189m (H1 2018: GBP160m), which reflects
positive trading in the merchant businesses and a strong recovery in Wickes. Toolstation
continued to demonstrate excellent sales growth performance, as ongoing investment
positions the business well for future profit and cash flow growth. Further progress was
made towards the Group's cost reduction targets, with achieved savings broadly offsetting
the inflation in the overhead cost base.
The Group continues to generate good cash flow. The Group has changed its definition of
free cash flow so that it better reflects the operating cash generation of the business as
it now excludes all freehold property transactions but includes both maintenance and
investment capital expenditure. The Group generated GBP40m of free cash flow in the first
half of the year, up from GBP21m on the same basis in the first half of 2018. This was
achieved despite a significant step up in working capital in the first half as the Group
increased inventory levels in anticipation of the UK's potential exit from the EU in the
spring. This elevated level has been maintained given the delay to the UK's expected
departure from the EU.
Adjusted earnings per share (EPS) increased by 19.9% to 50.1p (H1 2018 illustrative
comparative: 41.8p), driven by the stronger adjusted operating profit generation and a
lower deferred tax charge in H1 2019.
The Board has declared an interim dividend of 15.5p (2018: 15.5p).
Merchanting ERP programme
The Group announced a delay to its Merchant ERP replacement programme in December 2018 as
this programme has continued to face significant challenges. As a result, the Group is
considering whether to implement the various elements of an ERP system as separate items,
after modernising the Group's core IT architecture.
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DJ Travis Perkins: Interim results for the six -2-
A revised approach may incorporate components from the existing project, however under
accounting standards the Directors have concluded that the existing assets of GBP111m should
be written off.
Discontinuing operations
At the Capital Markets Event held in December 2018, the Group announced its intention to
divest the Plumbing & Heating business during 2019. The Group expects that the divestment
is likely to be concluded by the end of 2019, and as such the Plumbing & Heating business
has been classified as an asset held for sale and accounted for as a discontinuing
operation.
Sales and operating profit for discontinuing operations are excluded from reported adjusted
operating profit, with profits from discontinuing operations included in total Group
results after tax.
Strategic progress
At the 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.
Focus on Trade
The Group's strategy to focus on advantaged trade businesses is built on the solid
foundations already in place across the specialist and mixed merchants, with a strong
culture of operational efficiency and excellent customer service. A number of key
priorities have been identified to drive sustainable growth across all the Merchanting
businesses in the medium term, improving market share and best positioning the businesses
to compete successfully in the future:
· Removal of the divisional structure above the Merchanting businesses, to form a broader
"Trade Merchanting Organisation", reducing cost and speeding up decision making
· Greater empowerment of branch managers, enabling them to make quicker, more relevant
decisions on behalf of customers and the Group
· Giving greater autonomy to branches to stock the right products in the right volumes to
fulfil local customer requirements
· Tailoring the trade proposition to best match specific customer groups, either through
product categories in the specialist merchants, or to deliver local customer requirements
in Travis Perkins
· Reducing the administrative burden on branch colleagues by simplifying processes and
reducing reporting requirements
Toolstation continues to demonstrate excellent growth and, in line with the strategic
pillar to focus on advantaged trade businesses, it remains a priority for the deployment of
capital. The Group is accelerating the expansion of the branch network to improve
convenience, and is further extending the product range including the addition of more
trade-focused brands.
Simplify the Group
Cost reduction activities
The simplification of the Group, including the removal of the divisional structure over the
trade merchanting businesses, is enabling the Group to reduce its overall above-branch cost
base. The Group remains on plan to achieve the GBP20m-GBP30m of annualised cost reductions by
mid-2020.
In 2019, the cost base has benefited from the annualisation of cost reduction activities in
Wickes and Travis Perkins in 2018, with around GBP15m of cost savings rolling into the first
half of the year. In addition, actions to achieve further annualised savings from the
planned GBP20m-GBP30m of around GBP10m have been completed in the half, with GBP6m of reduction
included in the H1 2019 results. These savings include operational cost savings relating to
the closure of the Tilbury range centre and the restructuring and streamlining of head
office support functions.
As anticipated, these savings have broadly offset inflation pressure in the overhead cost
base with increases in rent and rates, and growth in salary costs, in part due to the
increase in the living wage. The Group continues to invest in businesses to drive growth,
including the continued expansion of Toolstation and extra investment in front line branch
and sales colleagues in Travis Perkins.
Progress on Plumbing & Heating disposal
The separation of Plumbing & Heating from the Group's other merchanting businesses has
progressed well, with successful separation of the IT system, including back office and
finance systems, and separation of commercial agreements which enable the P&H business to
operate autonomously from the Group. As a result, the Group has initiated a disposal
process and expects to complete a transaction in 2019.
Proposed Wickes demerger
At the capital markets event in December 2018, the Group announced the intention to
strengthen the performance of Wickes and to capitalise on its clear competitive advantages
in the DIY, small trade and Kitchen and Bathroom markets. At the same time the Board
committed to review the options for maximising the value of Wickes in the medium term.
Since the capital markets update, good progress has been made in strengthening Wickes's
trading performance, and steps have been taken to provide Wickes with greater autonomy from
the Travis Perkins group through the separation of its systems and processes. After
reviewing the options, the Board has determined to demerge Wickes to shareholders as a
standalone business.
The demerger of Wickes is a key component of the overall Travis Perkins strategy to focus
on trade customers and to simplify the Group which the Board believes will underpin the
creation of enhanced value for shareholders. It is expected to complete in H1 2020.
The Board believes that Wickes, under a management team led by David Wood, is well
positioned to thrive as a stand-alone business. Wickes will have the autonomy to execute on
its strategy and allocate capital to its customer proposition and growth opportunities with
a clearer focus.
Outlook
The long term fundamentals of the Group's end markets remain robust, with growing demand
for housing in the UK, and the continued underinvestment in the repair, maintenance and
improvement of the existing, aging housing stock.
Whilst the Group demonstrated strong performance in the first half of the year, this was
against a softer trading period in H1 2018 with strengthening comparators for the remainder
of 2019. In the short term, the current level of uncertainty along with mixed signals from
the Group's key lead indicators make it difficult to forecast market conditions. As a
result, the Group maintains a cautious outlook for the near-term, although remains
confident in making progress across the year as a whole.
Technical guidance
The Group's technical guidance for 2019 is as follows:
· Effective tax rate of 19%
· Underlying finance charges similar to 2018, with the addition of around GBP55m of
interest on lease liabilities resulting from the implementation of IFRS 16 - Leases.
· Capital expenditure in 2019 of around GBP110m to GBP130m
· Property profits of around GBP20m (after the application of IFRS 16)
· Progressive dividend underpinned by strong cash generation
Segmental performance
*********************
Merchanting
H1 2019 H1 2018* Change
Total revenue GBP1,869m GBP1,783m 4.8%
Like-for-like growth 6.4% 2.4% 4.0ppt
Adjusted operating profit** GBP140m GBP133m 5.3%
Adjusted operating margin** 7.5% 7.5% -
ROCE 12% 11% 1ppt
Branch network*** 996 1001 (5)
*H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as
previously disclosed
**Divisional adjusted operating profit figures are presented excluding property profits
***2018 branch network figures for comparison are taken at 31 December 2018
Total sales in the Merchanting segment grew by 4.8% to GBP1,869m, with growth of 6.4% on a
like-for-like basis. Across the merchanting sector, strong sales growth in Q1 relative to
the inclement weather in Q1 2018 was followed by moderating growth in the second quarter,
driven by both significantly stronger comparatives and a slowing of underlying trade
markets in June.
Travis Perkins' like-for-like sales grew by 5.2%, demonstrating outperformance of the wider
merchanting market. This outperformance was driven by a number of factors, including early
encouraging signs from the initiatives in place to empower branch teams, make branch
ranging more tailored to specific local customers and to invest selectively in customer
facing branch and sales teams to improve service levels.
The specialist merchants continued their recent trend of outperforming their markets. CCF
achieved good sales growth, although this slowed towards the end of the half as supply
issues on plasterboard restricted the levels of growth in the market. These constraints are
expected to continue through the second half of 2019 and into 2020.
BSS expanded its reach into the air conditioning market through the recently acquired TF
Solutions business, with two further branches opened in the first half of 2019, taking the
total network to five. Keyline is successfully pursuing its strategy to focus on heavy
civils and drainage categories for large customers, and this has driven further sales
growth, primarily in the direct delivery of materials. Whilst this product and customer mix
is typically lower margin, it represents a significant improvement in return on capital, as
it enables the business to operate from fewer, larger, lower cost branches.
Merchanting adjusted operating profits grew by 5.3%, in line with the growth in revenue.
Savings from cost reduction activities in Travis Perkins in the second half of 2018 of
around GBP10m were annualised in the first half of 2019, in addition to further annualised
savings generated as part of the targeted GBP20m-GBP30m cost saving programme. Overall, these
savings were broadly offset by inflation in the overhead cost base, as well as through cost
investment in front line branch and sales colleagues which have helped to drive revenue
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growth ahead of the market in the first half of the year.
Merchanting operating margin was broadly stable, as operating leverage of the cost base
through volume growth offset modest pressure on gross margin. This gross margin pressure
was primarily due to shifts in product mix in Travis Perkins with higher growth in
heavyside products, and generally stronger growth in larger customers and deliveries direct
from suppliers to the customer across the merchanting businesses.
Merchanting return on capital increased by 1ppt compared to the first half of 2018,
primarily driven by the increase in adjusted operating profit through improved trading and
the positive impact of cost reduction activities, combined with a modest reduction in
capital employed.
Toolstation
H1 2019 H1 2018* Change
Total revenue GBP208m GBP169m 23.1%
Like-for-like growth 17.3% 10.7% 6.6ppt
Adjusted operating profit** GBP13m GBP10m 30.0%
Adjusted operating margin** 6.3% 5.9% 40bps
ROCE 10% 10% -
Branch network (UK)*** 356 335 21
Branch network (Europe)*** 53 40 13
*H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as
previously disclosed
**Divisional adjusted operating profit figures are presented excluding property profits
***2018 branch network figures for comparison are taken at 31 December 2018
Toolstation demonstrated outstanding revenue growth of 23.1%, and 17.3% on a like-for-like
basis. This growth was primarily driven by the continued extension of the branch network,
the continued attraction of the low value, high convenience proposition and the further
extension of ranges available online.
Adjusted operating profit grew by GBP3m, with higher earnings from growing sales volumes
partially offset by continued investment in the business to drive future growth. Return on
capital was flat year-on-year as the growth in adjusted operating profit was offset by the
continuing growth in the branch network. A further 21 Toolstation branches were opened in
the half, with new branches performing ahead of expectations, including further trials of
new formats including smaller footprint branches. There are over 60 branch openings planned
in total for 2019, with all of the remaining sites for the year already identified.
The range of products available online and through the catalogue was extended by an
additional 1,500 products, with added ranges being primarily trade focused brands.
Toolstation's net promoter score increased by five points to 86, reflecting the strong
proposition and the high quality of service in branch. The new website, launched in
December 2018, is driving strong growth in click & collect transactions, and continues to
demonstrate very high conversion rates of site visitors.
The development of the Toolstation business in Europe continued, with a further 13 branches
opened, bringing the total to 53. Branches opened in the Netherlands continue to perform
strongly, with further network expansion planned in the second half of the year. The branch
trial in France continues to perform well, and a first trial branch was opened in Belgium.
Retail
H1 2019 H1 2018* Change
Total revenue GBP695m GBP638m 8.9%
Like-for-like growth 9.7% (7.4)% 17.1ppt
Adjusted operating profit** GBP52m GBP35m 48.6%
Adjusted operating margin** 7.5% 5.5% 200bps
ROCE 7% 5% 2ppt
Store network - Wickes*** 241 241 -
Store network - Tile Giant*** 95 96 (1)
*H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as
previously disclosed
**Divisional adjusted operating profit figures are presented excluding property profits
***2018 store network figures for comparison are taken at 31 December 2018
Wickes revenue has recovered strongly in the first half of 2019 after a difficult period in
2018, with like-for-like sales growth of 9.7%. Around 2% of the like-for-like growth is
estimated to be attributable to the milder weather in March and April in 2019 compared with
the same period in 2018.
Core DIY sales performance benefited from a strong, clear and well balanced trading plan
combined with the addition of new ranges, particularly in decorating and landscaping, and
improvements made in the supply chain to increase product availability in store.
Kitchen & Bathroom showroom (K&B) deliveries remained strong through the half, benefitting
from the order book carried into the year from the improved Q4 2018 order intake, along
with continued good order placement so far in 2019. The order book at the end of the half
is encouraging, although the wider market for consumer big-ticket purchases remains subdued
and the benefit of competitor withdrawal from the market is cycled in the second half of
the year.
Wickes adjusted operating profit showed a significant improvement over 2018, with growth of
49% to GBP52m. Gross margins, which were under pressure in 2018 from competitor pricing
activity, have remained broadly stable in 2019. Adjusted operating profit margin increased
by 200bps to 7.5%, with this improvement reflecting the volume growth in both Core DIY and
K&B, a mix shift to higher margin sales as K&B recovered strongly, and the benefits of the
intensive overhead cost reduction activity carried out in the first half of 2018. The
improvement in adjusted operating profit drove a 2ppt increase in return on capital
employed.
Three additional Wickes refits were completed in the half, which, along with one new store
opened, brings the total number of new store formats up to 125 from an overall network of
241 stores. Continuing development of digital capability and customer service channels
includes online-in-store capability, allowing colleagues to sell the full online range of
products to customers in store, either for in store collection or home delivery. This
enables colleagues to provide full-project service to all customers, whilst maintaining a
tight SKU range in store.
Improved stock accuracy, reductions in wastage and better product supply forecasting have
increased product availability in store. Better availability has supported targeted
promotional campaigns to drive footfall and sales. TradePro continues to be an attractive
proposition for our trade customers, with improvements in specific customer marketing.
As noted in the Summary section of this release, the Board intends to demerge Wickes to
shareholders as a standalone business in H1 2020.
Discontinuing operations - Plumbing & Heating
The Group announced at its Capital Markets event in December 2018 that it intended to
divest the Plumbing & Heating business during the course of 2019. The Group expects this
process to be completed by the end of 2019, and the P&H segment has been classified as a
discontinuing operation at 30 June 2019, with the asset held for sale.
H1 2019 H1 2018* Change
Total revenue GBP713m GBP774m (7.9)%
Like-for-like growth (3.9)% 19.8% (23.7)ppt
Adjusted operating profit** GBP24m GBP22m 9.1%
Adjusted operating margin** 3.4% 2.8% 60bps
ROCE 12% 10% 2ppt
Branch network*** 377 377 -
*H1 2018 figures used are illustrative comparatives including the impact of IFRS 16 as
previously disclosed
**Divisional adjusted operating profit figures are presented excluding property profits
***2018 branch network figures for comparison are taken at 31 December 2018
The separation of the Plumbing & Heating business has progressed according to plan during
the first half of 2019. A significant milestone was achieved with the successful separation
of the IT system in May, enabling the business to operate autonomously from the Group. The
disposal process is underway.
Plumbing & Heating revenue fell by 7.9% in the first half of 2019, and by 3.9% on a
like-for-like basis. This reduction was primarily down to a fall in sales through the
wholesale and contract businesses combined with milder weather in Q1 2019 when compared to
the same period in 2018. The merchant branches and online channels continued to demonstrate
encouraging growth.
Adjusted operating profit increased by GBP2m to GBP24m. A change to business mix saw reduced
sales in the lower margin wholesale business, but this was more than offset by growth of
higher margin sales in branches and online businesses, combined with ongoing actions to
tightly manage the overhead cost base.
Central costs
Unallocated central costs reduced by GBP2m to GBP16m (H1 2018: GBP18m when adjusted for IFRS 16).
The reduction was primarily driven by cost reduction actions taken to rightsize the central
function in line with the Group's simplification plans, whilst also focusing on delivering
an efficient support service to branches. Cost reductions were partially offset by
inflation, mainly in salaries.
Property transactions
The Group continues to recycle its freehold property portfolio to provide the best trading
locations for its businesses, whilst managing the level of capital allocated to owning and
developing freehold sites.
The Group received a net GBP9m of cash from property transactions in the first half of 2019
(H1 2018: GBP10m received). One new freehold site was purchased at a cash cost of GBP7m, more
than offset by the disposal of three freehold sites which were excess to requirements
generating proceeds of GBP18m. The Group continues to develop new sites, with branches
completed and opened in Worthing, Sevenoaks and Loughborough, with total construction costs
of GBP2m.
The recycling of capital generated property profits of GBP6m in the first half of 2019. The
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application of IFRS 16 defers an element of the property profits recognised on sale and
leaseback transactions. For the equivalent half year period in 2018, the comparative
property profit figure would have been GBP11m when adjusted for IFRS 16 (H1 2018 as reported:
GBP17m). The Group expects to recognise around GBP20m of property profits in 2019, after the
application of IFRS 16.
Financial Performance
*********************
Revenue analysis
Revenue from the continuing Group grew by 6.9% in total, and by 8.0% on a like-for-like
basis. There was good growth in all continuing segments, with a strong recovery in Wickes,
continuation of excellent growth in Toolstation, and good growth across the Merchanting
businesses.
Volume, price and mix analysis
Total revenue Merchanting Toolstation Retail Continuing
Group
Volume 4.6% 15.4% 10.0% 6.8%
Price and mix 1.8% 1.9% (0.3%) 1.2%
Like-for-like 6.4% 17.3% 9.7% 8.0%
revenue growth
Network expansion (0.8)% 5.8% (0.8)% (0.5)%
and acquisitions
Trading days (0.8)% - - (0.6)%
Total revenue 4.8% 23.1% 8.9% 6.9%
growth
Quarterly like-for-like revenue analysis
Like-for-like Merchanting Toolstation Retail Continuing
revenue growth Group
Q1 2019 10.6% 19.1% 10.0% 11.0%
Q2 2019 2.7% 15.7% 9.4% 5.2%
H1 2019 6.4% 17.3% 9.7% 8.0%
Levels of inflation were lower in the first half of 2019 than in recent periods, with sales
price inflation in the trade businesses at around 2%, and broadly flat pricing in Wickes.
There was one fewer trading day in the Merchanting businesses in the first half of the
year. There will be one extra trading day in the second half to even out the year as a
whole.
The main area of network expansion in the Group continues to be within the Toolstation
business, with an additional 21 branches opened, and the trading growth of these branches
being particularly strong. This was partially offset by modest reductions in the network in
the Merchant businesses, particularly in Keyline as the business focuses on operating from
fewer, more efficient branches, and in Travis Perkins where some smaller branches have been
consolidated, resulting in a net reduction of 5 branches.
Operating profit and margin
GBPm H1 H1 2018 H1 2018 H1 2018 Change*
2019 illustr
ative
IFRS 16
As reported adjustm IFRS 16
(pre-IFRS 16) ent illustrat
ive
comparati
ves
Restated to
exclude P&H
Merchanting 140 129 4 133 5.3%
Toolstation 13 9 1 10 30.0%
Retail 52 20 15 35 48.6%
Property 6 14 (4) 10 (40.0)%
Unallocated costs (16) (16) (2) (18) (11.1)%
Adjusted 195 156 14 170 14.7%
operating profit
Amortisation of (4)
acquired
intangible assets
Impairment (127)
Operating profit 64
from continuing
operations
*Changes calculated versus H1 2018 illustrative comparatives including the impact of IFRS
16 as previously disclosed
Adjusting items in the period included:
· An adjusting item of GBP111m relating to the impairment of assets relating to the ERP
project
· Adjusting items totalling GBP13m relating to the closure of the Built business in April
2019
· Adjusting items of GBP4m relating to increasing the autonomy of the Wickes business
Finance charge
Net finance charges, shown in note 5, were GBP41m (2018: GBP10m). Of this GBP31m year-on-year
difference, around GBP28m was due to the interest charge on leased assets recognised as part
of the implementation of IFRS 16 - Leases.
Interest costs on borrowings were broadly unchanged from 2018 at GBP10m, although there was
an additional charge of GBP1.5m relating to the early refinancing of the Group's revolving
credit facility, which was completed in January 2019. The mark-to-market of foreign
exchange contracts at the half year was not material.
Taxation
The tax charge for continuing activities for the period to 30 June 2019, including the
effect of adjusting items, is GBP2.7m (2018: GBP25.8m). This represents an effective tax rate
(ETR) of 13.0% (2018: negative 22.3%).
The tax charge for continuing activities before adjusting items is GBP25.8m (2018: GBP27.8m)
giving an adjusted ETR of 17.4% (standard rate 19.0%, 2018 actual: 19.7%). The adjusted ETR
is lower than the standard rate due to the effect of non-taxable property profits exceeding
the effect of costs which are not deductible for tax purposes.
Earnings per share
The Group reported profit after tax for continuing operations of GBP17m (H1 2018: GBP(142)m
loss). Basic earnings per share (EPS) from continuing operations were 6.9p per share (H1
2018: (57.2)p per share). The 2019 statutory reported profit after tax figure was impacted
by the write off of assets related to the Group's ERP programme, whilst the 2018 figure was
impacted by the impairment of goodwill and intangible assets in Wickes.
Adjusted earnings per share increased by 19.9% to 50.1p per share (H1 2018: 41.8p per
share). This increase was driven by the growth in adjusted operating profit, and a lower
deferred tax charge in H1 2019.
Reconciliation of reported to adjusted earnings
GBPm Six months ended Six months ended
30 June 2019 30 June 2018
(restated)
Profit / (loss) attributable 17.0 (142.4)
to the owners of the parent
from continuing operations
Adjusting items 127.3 256.6
Tax on adjusting items (23.1) (2.0)
Amortisation of acquired 4.1 4.0
intangible assets
Tax on amortisation of (0.9) (0.8)
acquired intangible assets
Earnings for adjusted earnings 124.4 115.4
per share
Cash flow and balance sheet
***************************
Free cash flow
The Group has redefined its basis for measuring free cash flow (FCF) to better reflect the
cash generation of the business. Under the new definition, FCF excludes all freehold
property transactions, both investments and disposals, and includes all base capex: the sum
of maintenance and investment capital expenditure.
The FCF statement includes all cash flows from continuing and discontinuing operations.
GBPm H1 2019 H1 2018
Group adjusted EBITA excluding property profits 214 162
Depreciation of PPE and other non-cash movements 70 69
Change in working capital (134) (104)
Net interest paid (excluding lease interest) (4) (1)
Interest on lease liabilities (30) -
Tax paid (30) (28)
Adjusted operating cash flow 86 98
Capital investments
Capex excluding freehold transactions (51) (83)
Proceeds from disposals excluding freehold 5 6
transactions
Free cash flow before freehold transactions 40 21
Under the new definition, FCF of GBP40m was generated in the first half of the year (H1 2018:
GBP21m). The increase was primarily driven by the higher operating profits generated by the
Group and lower base capital expenditure.
As expected, the increase in working capital was higher in the first half of 2019.
Inventories, which have been held flat in recent years, increased by over GBP50m in the half,
relating to the Group building up inventory in anticipation of the UK's potential exit from
the EU in the spring. This elevated level has been maintained given the delay in the UK's
expected departure from the EU, and the Group will make decisions on the optimal level of
inventory to protect customers' access to materials. Trade receivables grew in line with
the growth in sales, with around two thirds of Group sales being conducted through a
customer credit account.
Capital investment
In line with the Group's guidance at the beginning of 2019, capital investment was lower,
with GBP51m of base capital expenditure (H1 2018: GBP83m).
GBPm H1 2019 H1 2018
Maintenance (22) (25)
IT (12) (24)
Growth capex (17) (34)
Base capital expenditure (51) (83)
Freehold property (9) (41)
Gross capital expenditure (60) (124)
Disposals 29 51
Net capital expenditure (31) (73)
Maintenance capital expenditure was broadly similar year-on-year, and continues to be
primarily driven by the required maintenance and replacement of the Group's vehicle fleet.
Growth capex investment reduced significantly in the half, at GBP17m (2018: GBP34m), primarily
due to fewer store refits completed in the period. The main focus of investment in H1 2019
concentrated on the continued expansion of the Toolstation branch network.
Uses of free cash flow
GBPm H1 2019
Free cash flow 40
(MORE TO FOLLOW) Dow Jones Newswires
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DJ Travis Perkins: Interim results for the six -5-
Investments in freehold property (9)
Disposal proceeds from freehold transactions 24
Acquisitions / disposals (20)
Dividends (78)
Pensions payments (10)
Purchase of own shares (14)
Cash payments on adjusting items (33)
Other (16)
Change in cash/cash equivalents (116)
Additional cash contributions to the defined benefit pension schemes above the income
statement charge, including the annual payment against the pension SPV, were GBP10m (2018:
GBP8m). The cash cost of 2019 adjusting items, and utilisation of prior year provisions for
adjusting items was GBP33m, with costs incurred in the removal of the divisional structure
above the Merchanting businesses, separation of the P&H businesses, and increasing autonomy
of Wickes.
Under the new policy initiated in 2018 for the Group to purchase shares in the market for
employee share schemes; GBP14m of shares were purchased in the period.
There was a payment of GBP18m made on the acquisition of a further 35% of the Underfloor
Heating Store business, taking the total Group holding to 90%.
Net debt and funding
The move to accounting under IFRS 16 has changed the balance sheet metrics around debt. The
Group has defined new debt measures as follows:
· Covenant net debt - a new KPI which matches the definition of net debt in the Group's
banking and bond covenants. H1 2018 covenant net debt has been calculated as a direct
comparative figure.
· Net debt - The Group has stopped reporting lease adjusted net debt as the
implementation of IFRS 16 - Leases means that the effect of leases is already reflected
in net debt. 2018 results have not been restated.
Covenant net debt was broadly flat year on year. Fixed charge cover improved to 3.0x,
primarily driven by the increase in adjusted EBITDA. The net debt to adjusted EBITDA metric
under IFRS 16, with net debt including all lease obligations, reduced to 2.8x, moving
towards the Group's medium term leverage target of 2.5x.
Medium Term H1 2019 H1 2018
Guidance
Covenant net debt GBP414m GBP409m GBP5m
IFRS 16 Net debt GBP1,739m
Lease adjusted net debt GBP2,001m
Gearing 40.9% 47.6% n/a
Fixed charge cover 3.5x 3.0x 2.7x 0.3x
Net debt: Adjusted 2.5x 2.8x 3.0x
EBITDA*
*H1 2018 comparative figure is calculated as Lease Adjusted Net Debt to EBITDAR with a
lease adjustment based on 8x the annual net rent charge. Whilst not directly comparable,
the two methods are broadly consistent.
Funding
As at 30 June 2019, the Group's committed funding of GBP950m comprised:
· GBP250m guaranteed notes due September 2021, listed on the London Stock Exchange
· GBP300m guaranteed notes due September 2023, listed on the London Stock Exchange
· A revolving credit facility of GBP400m, refinanced in January 2019, which runs until
2024, advanced by a syndicate of 8 banks.
As at 30 June 2019, the Group had undrawn committed facilities of GBP400m (2018: GBP550m) and
deposited cash of GBP52m (2018: GBP80m).
The Group's credit rating, issued by Standard and Poor's, was maintained at BB+ stable
following its review in April 2019.
The Group has a policy of funding through floating interest rate facilities owing to the
significant implicit fixed interest charges within its leases. However, owing to the
uncertainty surrounding the UK's decision to leave the EU and historically low fixed
interest rates achieved on its bonds, it took a decision in 2016 to fix all of its interest
rate costs other than through drawings on its revolving credit facility, which were nil as
at 30 June 2019.
Dividend
The interim dividend will be unchanged at 15.50 pence (H1 2018: 15.50 pence) and will be
paid on 08 November 2019, at a cash cost of approximately GBP37m.
Principal risks and uncertainties
The risk environment in which the Group operates does not remain static. Whilst risk trends
may have evolved, the Directors consider that the principal risks and uncertainties faced
by the Group have been, and are expected to remain, consistent with those described on
pages 34 to 41 of the 2018 Annual Report and Accounts. Details are provided for inherent
risks relating to the changing customer and competitor landscape, colleague recruitment,
retention and succession, supplier dependency and disintermediation, unsafe practices
resulting in harm to stakeholders, the efficient allocation of capital, business
transformation and improvement projects, Brexit, market conditions, execution of planned
disposals and potential acquisitions, data security and the changing regulatory framework.
Condensed consolidated income statement
***************************************
GBPm Six months ended Six months ended Year
30 June 30 June ended
2019 2018 31 December
(unaudited) (unaudited) 2018
(restated*) (audited)
(restated*)
Revenue 2,771.4 2,590.7 5,212.8
Adjusted operating 195.4 156.3 332.8
profit (note 17)
Adjusting items (127.3) (256.6) (340.4)
(note 2)
Amortisation of (4.1) (4.0) (8.7)
acquired
intangible assets
Operating profit / 64.0 (104.3) (16.3)
(loss)
Share of (2.5) (1.1) (4.0)
associates'
results
Net finance costs (40.7) (10.2) (23.7)
(note 5)
Profit / (loss) 20.8 (115.6) (44.0)
before tax
Tax before (25.8) (27.8) (55.5)
adjusting items
Tax on adjusting 23.1 2.0 15.4
items
Tax (note 6) (2.7) (25.8) (40.1)
Profit / (loss) 18.1 (141.4) (84.1)
for the period
from continuing
operations
(Loss) / profit (6.5) (6.5) 0.6
from the period
from discontinued
operations (note
12)
Profit / (loss) 11.6 (147.9) (83.5)
for the period
Attributable to:
Owners of the 10.5 (148.9) (85.6)
Company
Non-controlling 1.1 1.0 2.1
interests
11.6 (147.9) (83.5)
Earnings per ordinary share (note 8)
Basic 6.9p (57.2)p (34.7)p
Diluted 6.7p (57.1)p (34.6)p
Total dividend declared per share (note 9) 15.5p 15.5p 47.0p
*Comparative figures have been restated to exclude the results of the Plumbing & Heating
division, which has been presented as a discontinuing operation (note 12).
Condensed consolidated statement of comprehensive income
********************************************************
GBPm Six months ended Six months Year
30 June ended ended
2019 30 June 2018 31 December
2018
(unaudited) (unaudited
restated) (audited
restated)
Profit / (loss) 11.6 (147.9) (83.5)
for the period
Items that will
not be
reclassified
subsequently to
profit and
loss:
Actuarial (39.9) 73.7 102.0
(losses) /
gains on
defined benefit
pension schemes
(note 7)
Income taxes 15.5 (14.0) (19.3)
relating to
items not
reclassified
Other (24.4) 59.7 82.7
comprehensive
(loss) / income
for the period
Total (12.8) (88.2) (0.8)
comprehensive
loss for the
period
Attributable to:
Owners of the Company (13.9) (89.2) (2.9)
Non-controlling interests 1.1 1.0 2.1
(12.8) (88.2) (0.8)
Total comprehensive (loss) / income for the
period attributable to the owners of the
Company arises from:
Continuing operations (7.4) (79.9) (3.5)
Discontinued operations (6.5) (9.3) 0.6
(13.9) (89.2) (2.9)
Condensed consolidated balance sheet
************************************
GBPm As at As at As at
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
ASSETS
Non-current assets
Goodwill 1,222.7 1,292.8 1,289.2
Other intangible assets 318.5 396.9 385.4
Property, plant and 835.8 962.9 913.2
equipment
Right-of-use assets 1,146.5 - -
Interest in associates 46.6 25.1 34.2
Investments 5.8 11.3 6.6
Retirement benefit asset 48.5 54.9 81.2
(note 7)
Other receivables - 37.4 43.3
Total non-current assets 3,624.4 2,781.3 2,753.1
Current assets
Inventories 687.3 809.4 855.3
Trade and other receivables 1,024.0 1,268.3 1,253.8
(MORE TO FOLLOW) Dow Jones Newswires
July 31, 2019 02:02 ET (06:02 GMT)
DJ Travis Perkins: Interim results for the six -6-
Derivative financial - 2.0 -
instruments
Cash and cash equivalents 139.3 151.5 255.4
Total current assets 1,850.6 2,231.2 2,364.5
Assets classified as held 762.3 - -
for sale (note 12)
Total assets 6,237.3 5,012.5 5,117.6
Condensed consolidated balance sheet (continued)
GBPm As at As at As at
30 June 30 June 31 December
2019 2018 2018
(unaudited) (unaudited) (audited)
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital 25.2 25.2 25.2
Share premium account 545.5 545.5 545.4
Merger reserve 326.5 326.5 326.5
Revaluation reserve 14.7 15.7 14.7
Own shares (55.7) (53.0) (47.8)
Other reserve (4.5) (4.9) (5.6)
Retained earnings 1,655.4 1,793.3 1,847.5
Equity attributable to the 2,507.1 2,648.3 2.705.9
owners of the Company
Non-controlling interests 5.1 12.7 11.8
Total equity 2,512.2 2,661.0 2,717.7
Non-current liabilities
Interest bearing loans and 583.2 606.7 605.2
borrowings
Lease liabilities 1,155.6 - -
Derivative financial 4.7 4.9 0.9
instruments
Long-term provisions - 17.8 18.4
Deferred tax liabilities 31.2 75.9 77.8
Total non-current 1,774.7 705.3 702.3
liabilities
Current liabilities
Interest bearing loans and - 5.6 3.8
borrowings
Lease liabilities 139.8
Derivative financial - - 4.7
instruments
Trade and other payables 1,230.5 1,549.5 1,603.2
Tax liabilities 68.5 40.6 25.9
Short-term provisions 55.9 50.5 60.0
Total current liabilities 1,494.7 1,646.2 1,697.6
Liabilities classified as 455.7 - -
held for sale (note 12)
Total liabilities 3,725.1 2,351.5 2,399.9
Total equity and liabilities 6,237.3 5,012.5 5,117.6
The interim condensed financial statements of Travis Perkins plc, registered number 824821,
were approved by the Board of Directors on 30 July 2019 and signed on its behalf by:
John Carter Alan Williams
Chief Executive Officer Chief Financial Officer
Condensed consolidated statement of changes in equity
*****************************************************
GBPm Issued Share Merger Revaluation Own Other Retained Total Non- Total
share premi reserv reserve shares earnings equity contr equity
capita um e before ollin
l accou non-co g
nt ntroll inter
ing est
intere
st
At 31 25.2 545.4 326.5 14.7 (47.8) (5.6) 1,847.5 2,705. 11.8 2,717.
December 9 7
2018
(audited)
IFRS 16 - - - - - - - (95.9) (95.9) - (95.9)
Leases
adoption
(note 18)
At 1 January 25.2 545.4 326.5 14.7 (47.8) (5.6) 1,751.6 2,610. 11.8 2,621.
2019 0 8
(restated)
Profit for - - - - - - 10.5 10.5 1.1 11.6
the period
Other - - - - - - (24.4) (24.4) - (24.4)
comprehensiv
e loss for
the period
net of tax
Total - - - - - - (13.9) (13.9) 1.1 (12.8)
comprehensiv
e (loss) /
income for
the period
Dividends - - - - - - (78.4) (78.4) - (78.4)
Dividend - - - - - - (0.1) (0.1) - (0.1)
equivalent
payments
Issue of - 0.1 - - - - - 0.1 - 0.1
share
capital
Purchase of - - - - (14.0) - - (14.0) - (14.0)
own shares
Option on - - - - - 0.8 - 0.8 - 0.8
non-controll
ing interest
Acquisition - - - - - - (12.0) (12.0) (7.8) (19.8)
of
non-controll
ing interest
Tax on share - - - - - - 0.1 0.1 - 0.1
based
payments
Foreign - - - - - 0.3 - 0.3 - 0.3
exchange
Own shares - - - - 6.1 - (6.1) - - -
movement
Credit to - - - - - - 14.2 14.2 - 14.2
equity for
equity-settl
ed share
based
payments
At 30 June 25.2 545.5 326.5 14.7 (55.7) (4.5) 1,655.4 2,507. 5.1 2,512.
2019 1 2
(unaudited)
GBPm Issued Share Merger Revaluation Own Other Retained Total Non- Total
share premi reserv reserve shares earnings equity cont equity
capita um e before roll
l accou non-con ing
nt trollin inte
g rest
interes
t
At 1 25.2 543.4 326.5 15.7 (15.3) (4.9) 1,958.0 2,848.6 11.7 2,860.3
January
2018
(audited)
IFRS 9 - - - - - (2.4) (2.4) - (2.4)
adoption
At 1 25.2 543.4 326.5 15.7 (15.3) (4.9) 1,955.6 2,846.2 11.7 2,857.9
January
2018
(restated)
Loss for - - - - - - (148.9) (148.9) 1.0 (147.9)
the period
Other - - - - - - 59.7 59.7 - 59.7
comprehens
ive income
for the
period net
of tax
Total - - - - - - (89.2) (89.2) 1.0 (88.2)
comprehens
ive income
for the
period
Dividends - - - - - - (75.6) (75.6) - (75.6)
Dividend - - - - - - (0.5) (0.5) - (0.5)
equivalent
payments
Issue of - 2.0 - - - - - 2.0 - 2.0
share
capital
Purchase - - - - (43.5) - - (43.5) - (43.5)
of own
shares
Tax on - - - - - - (0.1) (0.1) - (0.1)
share
based
payments
Own shares - - - - 5.9 - (5.9) - - -
movement
Credit to - - - - - - 9.0 9.0 - 9.0
equity for
equity-set
tled share
based
payments
At 30 June 25.2 545.4 326.5 15.7 (52.9) (4.9) 1,793.3 2,648.3 12.7 2,661.0
2018
(unaudited
)
Condensed consolidated statement of changes in equity (continued)
GBPm Issued Share Merger Revaluation Own Other Retained Total Non- Total
share premi reserv reserve shares earnings equity contr equity
capita um e before ollin
l accou non-con g
nt trollin inter
g est
interes
t
At 1 January 25.2 543.4 326.5 15.7 (15.3) (4.9) 1,955.6 2,846.2 11.7 2,857.9
2018 (audited)
Loss for the - - - - - - (85.6) (85.6) 2.1 (83.5)
year
Other - - - - - - 82.7 82.7 - 82.7
comprehensive
income for the
year net of
tax
Total - - - - - - (2.9) (2.9) 2.1 (0.8)
comprehensive
(loss) /
income for the
year
Dividends - - - - - - (114.1) (114.1) (2.0) (116.1)
Dividend - - - - - - (0.8) (0.8) - (0.8)
equivalent
payments
Issue of share - 2.0 - - - - - 2.0 - 2.0
capital
Purchase of - - - - (43.4) - - (43.4) - (43.4)
own shares
Adjustments in - - - (1.0) - - 1.0 - - -
respect of
revalued fixed
assets
Equity-settled - - - - - - 19.7 19.7 - 19.7
share-based
payments, net
of tax
Option on - - - - - (0.7) - (0.7) - (0.7)
non-controllin
g interest
Foreign - - - - - - (0.1) (0.1) - (0.1)
exchange
(MORE TO FOLLOW) Dow Jones Newswires
July 31, 2019 02:02 ET (06:02 GMT)
Own shares - - - - 10.9 - (10.9) - - -
movement
At 31 December 25.2 545.4 326.5 14.7 (47.8) (5.6) 1,847.5 2,705.9 11.8 2,717.7
2018 (audited)
Condensed consolidated cash flow statement
******************************************
GBPm Six months ended Six months ended Year ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited)
(audited)
Cash flows from
operating
activities
Adjusted 219.8 178.7 374.5
operating profit
Adjustments for:
Depreciation of 48.0 51.5 101.0
property, plant
and equipment
Depreciation of 84.0 - -
right-of-use
assets
Amortisation of 8.5 8.4 15.5
internally-gener
ated intangibles
Share-based 14.2 9.0 19.6
payments
Other non-cash 0.1 (2.5) 2.1
movements
Gains on (6.0) (17.0) (26.8)
disposal of
property, plant
and equipment
Adjusted 368.6 228.1 485.9
operating cash
flows
(Increase) / (50.7) 6.9 (49.5)
decrease in
inventories
Increase in (105.0) (146.4) (141.4)
receivables
Increase in 21.5 35.1 83.8
payables
Payments in (32.5) (12.3) (40.6)
respect of
adjusting items
Pension payments (6.3) (4.6) (7.2)
in excess of
charge
Cash generated 195.6 106.8 331.0
from operations
Other interest (4.6) (1.1) (26.2)
Interest on (30.1) - -
lease
liabilities
Income taxes (30.1) (27.8) (55.1)
paid
Net cash inflow 130.8 77.9 249.7
from operating
activities
Cash flows from
investing
activities
Interest 0.4 0.2 0.7
received
Proceeds on 28.8 51.1 98.4
disposal of
property, plant
and equipment
Development of (12.2) (23.1) (44.4)
software
Purchases of (48.2) (101.1) (146.9)
property, plant
and equipment
Interests in (14.9) (7.5) (17.6)
associates
Dividends - 0.5 -
received
Acquisition of (19.8) - (3.0)
businesses (note
16)
Disposal of - - 9.0
business
Net cash outflow (65.9) (79.9) (103.8)
from investing
activities
Cash flows from
financing
activities
Proceeds from 0.1 2.0 2.0
the issue of
share capital
Repayment of (85.3) (2.9) (6.5)
lease
liabilities /
finance lease
liabilities
Shares purchased (14.0) (43.5) (43.4)
Decrease in (3.4) (3.3) (3.3)
loans and
liabilities to
pension scheme
Dividends paid (78.4) (75.6) (116.1)
(note 9)
Net cash outflow (181.0) (123.3) (167.3)
from financing
activities
Net decrease in (116.1) (125.3) (21.4)
cash and cash
equivalents
Cash and cash 255.4 276.8 276.8
equivalents at
the beginning of
the period
Cash and cash 139.3 151.5 255.4
equivalents at
the end of the
period
Cash flows from discontinuing operations are presented in note 12(b).
Notes to the interim financial statements
*****************************************
1. General information and accounting policies
The interim financial statements have been prepared on the historical cost basis, except
that derivative financial instruments, available for sale investments and contingent
consideration arising from business combinations are stated at their fair value. The
condensed interim financial statements include the accounts of the Company and all its
subsidiaries ("the Group").
Basis of preparation
The financial information for the six months ended 30 June 2019 and 30 June 2018 is
unaudited. The June 2019 information has been reviewed by KPMG LLP, the Group's auditor,
and a copy of their review report appears on pages 47 and 48 of this interim report. The
June 2018 information was also reviewed by KPMG LLP. The financial information for the year
ended 31 December 2018 does not constitute statutory accounts as defined in section 435 of
the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December
2018 as prepared under International Financial Reporting Standards as adopted by the EU
("IFRS") has been delivered to the Registrar of Companies. The auditor's report on those
accounts was not qualified, did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act 2006.
The unaudited interim financial statements for the six months ended 30 June 2019 have been
prepared in accordance with IAS 34 - Interim Financial Reporting and have been prepared on
the basis of IFRS.
The annual financial statements of the Group are prepared in accordance with IFRS. As
required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the
condensed set of financial statements has been prepared applying the accounting policies
and presentation that were applied in the preparation of the Company's published
consolidated financial statements for the year ended 31 December 2018, except for the
adoption of new and amended standards as set out in note 18. The 2018 full year financial
statements are available on the Travis Perkins website (www.travisperkinsplc.co [1].uk).
The Directors are currently of the opinion that the Group's forecasts and projections show
that the Group should be able to operate within its current facilities and comply with its
banking covenants. The Group is however exposed to a number of significant risks and
uncertainties, which could affect the Group's ability to meet management's projections.
The Directors believe that the Group has the flexibility to react to changing market
conditions and is adequately placed to manage its business risks successfully. After making
enquiries, the Directors have formed a judgement that there is a reasonable expectation
that the Group has the resources to continue in operational existence for twelve months
from the date of signing these interim financial statements. For this reason the interim
financial statements have been prepared on a going concern basis.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and
the Group had to change its accounting policies and make transition adjustments as a result
of adopting the following standards:
· IFRS 16 - Leases
· Annual Improvements to IFRS 2015 - 2017 Cycle
The new standards other than IFRS 16 - Leases, did not have a material impact on the Group
and have been adopted without restating comparatives. The impact of the adoption of IFRS 16
- Leases and the new accounting policies are disclosed in note 18.
Notes to the interim financial statements
2. Adjusting items
To enable a reader of the interim financial statements to obtain a clear understanding of
the underlying trading, the Directors have presented the items below separately in the
income statement.
Six months Six months Year ended
ended 30 ended 30 June 31 December
June 2019 2018 2018
GBPm
IT-related impairment 111.2 - 15.7
charge
Built closure costs 12.6 - -
Wickes separation 3.5 - -
Impairment of goodwill - 246.3 252.1
Restructuring costs - 15.0 57.4
Pension-related items - (4.7) 4.9
Loss on disposal of - - 10.3
Birchwood Price Tools
127.3 256.6 340.4
IT-related impairment charge
............................
The Group announced a delay to its ERP project in December 2018 and this project has
continued to face significant challenges. As a result, and in the context of the
simplification of the Group, the Group is considering whether to implement the various
elements of an ERP system as separate items, after modernising the Group's core IT
architecture.
A revised approach may incorporate components from the existing project; however under the
accounting rules the Directors have concluded that the existing capitalised spend should be
written off. The charge consists of the write-off of GBP64.1m of capitalised development
spend and GBP44.5m of prepaid licence fees, as well as GBP2.6m of associated costs incurred in
2019.
A change in approach will necessitate a renegotiation of the Group's relationship with the
software provider. The relevant contracts include break clauses limiting any possible
contractual exposure. No provision has been made in respect of these contracts. The Group
has not made all disclosures in paragraphs 84-89 of IAS 37 - Provisions, Contingent
Liabilities and Contingent Assets as this would seriously prejudice the Group's position.
Closure of the Built business
(MORE TO FOLLOW) Dow Jones Newswires
July 31, 2019 02:02 ET (06:02 GMT)
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