FULL-YEAR RESULTS Full-Year Results

Transcription

1 FULL-YEAR RESULTS Full-Year Results

2 Agenda Financial review Tony Buffin p4 Strategy update John Carter p17 Appendices p27 Full-Year Results

3 Highlights 1 2 Good strategic progress Agility against mixed market conditions Solid overall performance despite mixed market conditions in second half Encouraging results from Wickes, TP, Toolstation, CCF, Keyline & Benchmarx Plumbing & Heating challenges persist with review underway Near term industry outlook remains mixed but strong long term fundamentals intact Businesses well placed to respond to their respective market conditions Management has track record of adopting the right trading and investment stance 3 Selective focus on key opportunities Strong financial position & cash generation underpinning disciplined investment Capital allocation focused on structurally advantaged businesses Continued investment in self-help initiatives Extending structural advantage in fragmented markets Full-Year Results

4 FINANCIAL REVIEW. TONY BUFFIN Full-Year Results

5 Key financial highlights Year ended 31 December Year-on-year change Revenue 6,217m 5,942m 4.6% Like-for-like sales growth 2.7% 3.8% Adjusted EBITA 409m 413m (1.0)% Adjusted EBITA excluding property profits 392m 389m 0.8% Adjusted earnings per share 120.4p 124.1p (3.0)% Underlying free cash flow (excluding exceptional tax payment) 436m 317m 37.5% Dividends per share 45.0p 44.0p 2.3% Lease adjusted ROCE 10.9% 11.6% * (70)bps Solid underlying performance & strong cash generation * 2015 returns restated for comparative purposes to reflect impairments of goodwill recognised in 2016 Full-Year Results

6 Exceptional & impairment charges in EBITA charge 2016 cash cost cash cost Branch closure programme 17m 1m 7m Supply chain restructuring 30m 6m 7m Central restructuring costs 4m 2m 2m Write-off of current assets 6m - - Exceptionals 57m 9m 16m Impairment of acquired intangibles 235m - - Total 292m 9m 16m Early action taken ahead of mixed market outlook Exceptional cash costs of 25m in 2016 & Cash payback over 2-3 years Non-cash impairment of 235m principally on P&H intangibles Full-Year Results

7 Good sales growth despite market conditions 5,942m Like-for-like sales growth 3.3% Group revenue growth (0.6)% 4.6% 1.6% 2015 Volume Price / mix Net new space Trading days 6,217m 2016 Q1 Q2 Q3 Q4 Full Year Prior year 5.1% 6.3% 2.6% 1.4% 3.8% Current year 4.2% 2.3% 2.0% 2.5% 2.7% 2-year growth 9.5% 8.7% 4.6% 3.9% 6.6% 0.3% Good sales growth of 4.6% driven by investments in advantaged businesses Market slowed in H2 with subsequent step down in 2- year LFL Deflation in H1 with inflation returning in H2 Online sales of ~ 250m up 30% in 2016 Full-Year Results

8 General Merchanting good performance Year ended 31 December Revenue 2,073m 1,972m 5.1% Like-for-like growth 1.7% 3.9% Adjusted EBITA 207m 199m 4.0% EBITA margin 10.0% 10.1% (10)bps Adjusted EBITA exproperty profits 193m 182m 6.0% Underlying EBITA margin 9.3% 9.2% 10bps Lease adjusted ROCE 15% 16% (1)ppt Branch network Sales growth of 5.1% and underlying profits up 6% Improving price consistency & pass-through Growth in heavyside range centre utilisation TP online sales growing well Benchmarx standout performance Full-Year Results

9 Plumbing & Heating a tough market Year ended 31 December Revenue 1,359m 1,371m (0.9)% Like-for-like growth (1.6)% (1.4)% Adjusted EBITA 39m 46m (15.2)% EBITA margin 2.9% 3.3% (40)bps Adjusted EBITA exproperty profits 36m 46m (21.7)% Underlying EBITA margin 2.6% 3.3% (70)bps Lease adjusted ROCE 1 10% 11% (1)ppt Branch network (27) Difficult trading environment in traditional channels Converted City Plumbing branches growing, but below expectations Further 27 branches closed Full review underway (see p20) 1 Lease adjusted ROCE after goodwill impairment., 2015 restated on a consistent basis. Full-Year Results

10 Contracts strong performance Year ended 31 December Revenue 1,267m 1,214m 4.4% Like-for-like growth 5.0% 8.5% Adjusted EBITA 76m 83m (8.4)% EBITA margin 6.0% 6.9% (90)bps Adjusted EBITA exproperty profits 76m 78m (2.6)% Underlying EBITA margin 6.0% 6.4% (40)bps Lease adjusted ROCE 12% 14% (2)ppt Branch network (14) 2-year LFL growth of 14% Strong momentum & significant share gains in Keyline & CCF EBITA & LAROCE short-term impact from: 25% CCF capacity increase in 2015, but maturing quickly Rebranding 13 Keyline branches to TP Ongoing outperformance in 17 Full-Year Results

11 Consumer significant market outperformance Year ended 31 December Revenue 1,518m 1,386m 9.5% Like-for-like growth 6.4% 5.3% Adjusted EBITA 101m 95m 6.3% EBITA margin 6.7% 6.8% (20)bps Adjusted EBITA exproperty profits 101m 93m 8.6% Underlying EBITA margin 6.7% 6.7% - Lease adjusted ROCE 8% 7% 1ppt Store network Strong growth in Wickes well ahead of the market 50+ new format Wickes stores now in place 36 new Toolstation stores and Netherlands doubled to bps growth in LAROCE since 2013 Full-Year Results

12 Strong cash flow funds investments & debt reduction 409m (2015: 413m) Adjusted EBITA 124m Depreciation & non-cash 13m 25m (50)m Excellent cash Free cash flow 436m Growth capex (119)m Dividends (111)m Freehold investments (68)m One-off tax payment (42)m Acquisitions (3)m Other items (24)m Decrease in net debt 69m Net disposals Working capital Maintenance CapEx (22)m (63)m 436m (2015: 317m) Interest Tax Underlying Free cash flow conversion of 107% Strong working capital management Net debt reduced by 69m Further strong cash generation expected Full-Year Results

13 Property investment underpins sustainable growth Property strategy driven by needs of operating businesses 207m invested in property 137m of assets not yet mature 70m not yet in use Value of property assets significantly above 450m NBV Sustainable profit generation from portfolio optimisation Usage of freehold investments made in last 3 years Property in use but not yet mature 137m 2017 completions 35m 2018 completions 70m property not yet in use 30m completions 5m 2-3% 0-2% 1-2% 1-2% Total 207m Freehold property activity in last 3 years Cumulative cash invested (207)m Cumulative cash from disposals 125m Net cash invested (82)m Cumulative change in net book value 164m Cumulative property profits 67m Full-Year Results

14 Strong financial position provides flexibility Mid-term ambition YoY Net debt - 378m 447m (69)m Lease debt - 1,506m 1,443m 63m Lease adjusted debt - 1,884m 1,890m (6)m LA Gearing % 47.2% * (190)bps Fixed charge cover 3.5x 3.3x 3.3x - LA Debt : EBITDAR 2.5x 2.7x 2.8x (0.1)x * 2015 LA Gearing restated for comparative purposes to reflect impairments of goodwill recognised in 2016 Modest reduction in lease adjusted debt Reduction in on-balance sheet debt through strong cash generation Steady progress in debt metric improvement Significant funding headroom in place Full-Year Results

15 Mixed market conditions in 2017 Housing transaction year-on-year growth 75% 65% 55% 45% 35% 25% 15% 5% General Merchanting LFL growth Housing transactions growth (lagged by 9 months) MAT housing transaction growth (lagged by 9 months) 0% Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 (5)% 15% 10% 5% GM LFL sales growth Stamp duty changes resulted in spike in buy-to-let transactions Expecting declines in secondary market housing transactions in 2017 Consumer confidence weakening (15)% (25)% Source: HM Revenue & Customs, February 2017 / Company data (5)% Underlying strength of RMI market difficult to predict Full-Year Results

16 2017 outlook Mixed market signals expecting declines in housing transactions & consumer confidence, but infrastructure & commercial activity potentially more encouraging Industry inflation expected to be offset by volume reductions P&H performance likely to worsen updates to follow through the year Three largest divisions, accounting for 90% of EBITA, well placed to outperform Technical guidance for 2017 is provided in Appendix I Full-Year Results

17 STRATEGY UPDATE. JOHN CARTER Full-Year Results

18 Significant progress 3 years in, with more to do Customer innovation Wickes & Toolstation value leadership Nationwide extended range in Travis Perkins >50 new format Wickes stores in place Click & Collect in Wickes, Toolstation & TP ~ 250m online sales across the Group Optimising network 18 new TP branches 12 new Wickes stores 115 new Toolstation stores 55% new CCF space 87 Benchmarx branches >200 tool hire implants 70% reduction in PTS network 11 Trade parks developed Scale advantage 5 merchant DCs enabling >30,000 SKUs next day Group kitchens offer servicing Wickes & Benchmarx Effective LCC sourcing 250m own brand sales Core IT systems replacement underway Portfolio management Strengthened management teams Modified incentive structures working well Proactive capital reallocation Selective channel & category bolt-ons Property asset recycling Full-Year Results

19 Largest Divisions demonstrating strong growth Revenue growth EBITA growth 5,149m 2013 General Merchanting 348m 425m 31m 2013 General Merchanting 311m Contracts Consumer Plumbing & Heating 8m 7% CAGR 6% CAGR 338m (6)m 38m (18)m Contracts Consumer Plumbing & Heating 6,217m m * 2016 Strong performance in three Divisions now 90% of EBITA P&H declines limiting progress Disciplined focus on high marginal return investments 330m growth capex in last 3 years Capital withdrawn from underperforming businesses * Decline of 2m in central unallocated costs Full-Year Results

20 P&H review underway further update in August A difficult and deteriorating traditional market Withdrawal of Government heating incentive schemes Intensely competitive contract heating market Higher propensity for online purchasing Increasing resonance of disruptive fixed price models (e.g. Toolstation) Traditional merchants have not innovated Despite market challenges we are not satisfied with our performance Full review underway Changes in management teams Initial outcomes of review to be shared at 2017 interim results Approach to review Better understanding of customers & channels Clarify opportunities to invest Will not avoid difficult decisions Full-Year Results

21 General Merchanting long runway for growth Leading position with new catchment opportunities Fragmented market structure provides TP opportunity Improved price guidance & consistency for customers Best-in-class distribution capabilities now in place, enabling extended range Upgrading core IT systems will enable enhanced multi-channel proposition Performance over last 3 years Cumulative sales growth 360m 65m Cumulative EBITA growth 21m 10m Cumulative capex (inc. maintenance) 128m 17m LAROCE in % 18% LAROCE on mature new branches 2 1 Excludes capital employed held at Divisional level 2 Marginal return on capital deployed does not include allocation of central overheads ~30-35% ~40% Full-Year Results

22 Contracts positioned for sustained outperformance Leading positions in categories throughout project lifecycle Market remains highly competitive Market sensitive to infrastructure & commercial spend Branch network positioned for ongoing market outperformance Cost efficient operating models to support future growth Performance over last 3 years Cumulative sales growth 115m 11m 185m Cumulative EBITA growth 6m (6)m 8m Cumulative capex (inc. maintenance) 19m 15m 31m LAROCE in % 12% 13% LAROCE on mature new branches 2 ~25% - ~35% 1 Excludes capital employed held at Divisional level 2 Marginal return on capital deployed does not include allocation of central overheads Full-Year Results

23 Consumer extending structural advantages Structural advantages providing significant scope for growth Market leading value proposition Further scope for category extension in both Wickes and Toolstation Toolstation Europe expanding & all stores contributing 115 new Toolstation stores only 18 months into maturity on average New stores demonstrate significant opportunity to further enhance further Performance over last 3 years Cumulative sales growth 243m 95m Cumulative EBITA growth 30m 8m Cumulative capex (inc. maintenance) 97m 19m LAROCE in % 10% LAROCE on mature new branches 2 1 Excludes capital employed held at Divisional level 2 Marginal return on capital deployed does not include allocation of central overheads ~30-35% ~50% Full-Year Results

24 Developing a channel agnostic future Supply chain capability well progressed Industry-leading distribution capabilities in place Provides opportunity for range conformity in all merchant branches Extended range with nextday availability nationwide Driving stock efficiency Now focusing on digital capabilities Real-time stock information Account price transparency Enhanced online product information available Online account management tools Flexible delivery / collect options & dynamic pricing Seamless multichannel experience Channel agnostic future customers determine how to order & access product >2,000 collection points creating structural advantage Digital communications in Consumer now Merchanting Contracts EDI Full-Year Results

25 Self-help investment supports long term growth 1 Strong market fundamentals Growing population and reducing household size leads to demand for ~230,000 homes every year New house construction supply shortfall increases reliance on ageing existing housing stock 2 Market fragmentation Our businesses are #1 or #2 in each of our markets, but with relatively low market shares Outperformance targeted given fragmented market structure of competitors & customers 3 Structural advantages Branch network: 2,000 locations in UK with strong financial position underpinning tight yields & site access Sourcing & supply chain: sourcing terms, range, stocking and distribution efficiency IT: selective shared development of software platforms and volume hardware purchasing 4 Superior propositions Range & value: improved promotions & KVI pricing, range extension, own label development, availability Space: new branch & store opening programme with implants intensifying returns Channel, format & customer service: investment in online channels, new formats and better service Full-Year Results

26 QUESTIONS. Full-Year Results

27 APPENDICES. I. Technical guidance II. Revenue analysis III. Adjusted earnings rec. IV. Branch numbers V. Sales drivers by Division VI. Like-for-like sales growth VII. Operating margin VIII. Earnings below EBITA IX. Cumulative capex X. Lead indicators XI. Definitions Full-Year Results

28 I. Technical guidance Tax consistent at ~20% Interest similar to 2016 Capex of m excluding freehold purchases Property profits of ~ 20m Progressive dividend policy underpinned by strong cash flows Full-Year Results

29 II. Revenue analysis year ended 31 December 2016 General Merchanting Northern Midlands South West South East Geography Timber Forest Heavyside Lightside P&H / Other Category Cash Credit Payment Collected Delivered Delivery % 20% 40% 60% 80% 100% Contracts Northern Midlands South West South East Geography Timber Forest Heavyside Lightside P&H / Other Category Cash Credit Payment Collected Delivered Delivery % 20% 40% 60% 80% 100% Plumbing & Heating Northern Midlands South West South East Geography P&H Category 98.4 Cash Credit Payment Collected Delivered Delivery % 20% 40% 60% 80% 100% Consumer Geography Payment Delivery Northern Midlands South West South East Timber Forest Heavyside Lightside P&H Category Cash 89.5 Collected 66.2 Credit 10.5 Delivered % 20% 40% 60% 80% 100% Full-Year Results

30 III. Adjusted earnings reconciliation Year ended 31 December Earnings EPS Earnings EPS Basic earnings & EPS 13m 5.1p 168m 67.8p Exceptional items - Branch closure programme 17m 4.3p Supply chain restructuring 30m 7.5p Other restructuring costs 4m 1.0p Write-off of current assets 6m 1.5p - Impairment of acquired intangibles 235m 94.4p 141m 57.0p Amortisation of intangibles 17m 6.6p 18m 7.3p Tax on amortisation (3)m (1.2)p (3)m (1.2)p Tax on exceptional items (15)m (6.1)p (8)m (3.2)p Deferred tax rate change (4)m (1.4)p (9)m (3.6)p Adjusted earnings & EPS 300m 120.4p 307m 124.1p Full-Year Results

31 IV. Branch numbers 31 December 2015 New Closures Rebrands 31 December 2016 Travis Perkins (19) Benchmarx (3) General Merchanting (22) City Plumbing (9) PTS 95 - (13) (1) 81 Other 24 - (5) - 19 Historical network growth Opening 1,262 1,303 1,813 1,868 1,896 1,939 1,975 2,028 New Closures (5) (9) (65) (20) (15) (65) (71) (57) Closing 1,303 1,813 1,868 1,896 1,939 1,975 2,028 2,053 Plumbing & Heating (27) Keyline & Rudridge 80 1 (3) (13) 65 BSS CCF Contracts (3) (13) 167 Wickes (2) Toolstation Tile Giant (3) Consumer (5) Group 2, (57) - 2,053 Branch numbers exclude City Heating Spares and Toolhire implants Full-Year Results

32 V. Sales drivers by Division Year ended 31 December 2016 General P&H Contracts Consumer Group Volume 1.4% (0.3)% 5.2% 8.5% 3.3% Price / mix 0.3% (1.3)% (0.2)% (2.1)% (0.6)% Like-for-like sales 1.7% (1.6)% 5.0% 6.4% 2.7% Trading days 0.4% 0.4% 0.4% - 0.3% Expansion 3.0% 0.3% (1.0)% 3.1% 1.6% Total sales growth 5.1% (0.9)% 4.4% 9.5% 4.6% Full-Year Results

33 VI. Like-for-like sales growth Like-for-like by quarter Like-for-like by half year Q Q Q Q Q Q Q Q H H H H H H General 8.1% 5.3% 1.7% 1.0% 4.7% 1.1% 0.6% 0.3% P&H (6.1)% 1.0% 1.7% (1.9)% 2.2% (1.4)% (4.1)% (2.7)% Contracts 15.1% 12.9% 5.5% 1.5% 2.1% 3.1% 5.7% 9.2% Consumer 6.0% 6.9% 2.3% 6.1% 7.3% 6.4% 6.3% 5.8% General 14.6% 11.3% 6.7% 1.4% 2.9% 0.5% P&H 7.4% (9.7)% (2.9)% (0.3)% 0.4% (3.4)% Contracts 11.1% 12.4% 13.9% 3.6% 2.7% 7.3% Consumer 6.8% 6.4% 6.5% 4.2% 6.5% 6.2% Group 5.1% 6.3% 2.6% 1.4% 4.2% 2.3% 2.0% 2.5% Group 10.2% 4.6% 5.7% 2.0% 3.1% 2.2% Full-Year Results

34 VII. Operating margin General Merchanting Plumbing & Heating Contracts Consumer Group 2015 EBITA margin 10.1% 3.3% 6.9% 6.8% 6.9% Change in gross margin 0.2% - (0.7)% (0.7)% (0.2)% Change in operating costs (0.1)% (0.6)% 0.2% 0.7% EBITA before in property profits 10.2% 2.7% 6.4% 6.8% 6.7% Change in property profits (0.2)% 0.2% (0.4)% (0.1)% (0.1)% 2016 EBITA margin 10.0% 2.9% 6.0% 6.7% 6.6% Full-Year Results

35 VIII. Earnings below EBITA Year ended 31 December Adjusted EBITA 409m 413m (1.0)% Net finance cost (28)m (31)m 9.7% Adjusted profit before tax 381m 382m (0.3)% Adjusted tax (80)m (75)m (6.7)% Adjusted profit after tax 301m 307m (2.0)% Weighted average shares Adjusted earnings per share 120.4p 124.1p (3.1)% Dividends per share 45.0p 44.0p 2.3% Full-Year Results

36 IX. Cumulative capital expenditure Investment area 2016 capex capex LAROCE range Maturity profile Extending leadership 41m 124m 20-30% 3 5+ years Investing to grow 30m 104m 15-20% 3 5+ years Infrastructure 48m 105m 0-30% 0 5+ years Total growth capex 119m 333m Property 68m 207m 15-20% n.a. Maintenance 50m 155m n.a. n.a. Total capex 237m 695m Full-Year Results

37 X. Lead indicators Site visitors 8pt Consumer confidence (5)pt Site reservations 26pt Climate for purchases (6)pt Mortgage approvals (4)% Equity withdrawal +1% Housing transactions Flat Retail Sales growth (0.6)% Housing prices +4% Architect work load 39% Construction output 1% Expected workload (8)pt New construction Trade confidence 12pt +3% orders Full-Year Results

38 XI. Definitions Metric EBITA Earning per share ( EPS ) Adjusted EBITA / Adjusted EPS Lease adjusted ROCE Lease adjusted debt LA Gearing Fixed charge cover LA Debt : EBITDAR Dividend cover Free cash flow ( FCF ) Total Shareholder Return ( TSR ) WALE Definition Earnings before interest, tax and amortisation Ratio of net profit after taxation to weighted number of ordinary shares outstanding EBITA or EPS adjusted for exceptional items and amortisation (see Appendix II for reconciliation) Ratio of earnings before interest, tax, amortisation and 50% of annual property rental expense to debt plus equity plus eight times annual property rental expense On-balance sheet debt (excluding derivative fair valuation adjustments) plus eight times annual property rental expense Ratio of lease adjusted debt to equity plus lease adjusted debt Ratio of earnings before interest, tax, depreciation, amortisation and property rentals to interest plus property rentals Ratio of lease adjusted debt to earnings before interest, tax, depreciation, amortisation and property rentals Ratio of earnings per share to dividends per share Net cash flow before dividends, growth capital expenditure, pension contributions & financing cash flows Ratio of opening market price per share to closing market price per share less opening market price per share plus dividends per share during the period Weighted average expiry of property leases Full-Year Results

39 XI. Definitions (continued) Metric Definition Site visitors House Builders Federation Survey / monthly / December 2016 / Balance score compared to a year ago Site reservations Mortgage approvals Housing transactions Housing prices Consumer confidence Climate for purchases Equity withdrawal Retail sales growth Architect work load Construction output Trade confidence Expected workload House Builders Federation Survey / monthly / December 2016 / Balance score compared to a year ago Bank of England / monthly / December 2016 / number of approvals % change year on year HM Revenue & Customers / monthly / January 2016 / number of houses sold above 40k % change year on year Nationwide / monthly / January 2017/ house price inflation % change year on year GFK / monthly / January 2017 / index score movement on previous year GFK / monthly / January 2017 / index score movement on previous year Bank of England / quarterly / Q / Change in Equity withdrawal as % of net earnings compared to previous quarter British Retail Consortium / monthly / January 2017 / LFL % change year on year Mirza and Nacey Survey / quarterly / Q / Index Construction output YTD ONS / monthly / December 2016 / % change year on year Travis Perkins survey materials spend / quarterly / Q view of Q / Balance score Federation of Master Builders / quarterly / Q view of Q / Balance score New construction orders Office for National Statistics / quarterly / Q / % change year on year (revised post publication 21/12/16) Full-Year Results

40 CONTACT. Jonathan Diec Matt Johnson vcard Download the Travis Perkins IR app for ipad Full-Year Results