Travis Perkins Plc · LSE:TPK
Travis Perkins — H1 2015 Earnings Presentation
40 slides from Travis Perkins's earnings presentation, Sep 6, 2015
Slide 1: Interim Results 2015
INTERIM RESULTS. 2015 Interim Results. 2015 1
Slide 2: Agenda
Agenda Group highlights John Carter p3 Financial review Tony Buffin p5 Strategy update John Carter p19 Appendices p31 Interim Results. 2015 2
Slide 3: 2015 interim key messages
2015 interim key messages 1 Continued market • Strong volume growth and continued outperformance of our markets outperformance • Pleasing performance across TP, Consumer and Contracts (notably Keyline & CCF) • Focused increase in capex to £131m to drive strong returns 2 Investing in • Continued bran
Slide 4: Group performance highlights
Group performance highlights Revenue • Continued sales growth outperformance growth of 7.8% to £2.9bn 9.0% EBITA • Strong underlying profit growth growth (ex- Property) Capex • Investing for long-term growth doubled to £131m LAROCE • Strong return on capital maintained at 10.5% Dividend • Dividend g
Slide 5: Financial Review. Tony Buffin
FINANCIAL REVIEW. Interim Results. 2015 TONY BUFFIN 5
Slide 6: Group performance summary
Group performance summary Year-on-year Six months ended 30 June H1 2015 H1 2014 change Revenue £2,943m £2,731m 7.8% Like-for-like sales growth 5.7% 10.2% (4.5)ppt Adjusted EBITA £185m £175m 5.7% Adjusted EBITA excluding property profits £182m £167m 9.0% Adjusted profit before tax £167m £162m 3.1% Ad
Slide 7: Continued sales growth outperformance
Continued sales growth outperformance Group revenue growth 2.1% • Good volume growth outperforming our markets £2,943m (0.3)% 6.0% £2,731m • Consistent low inflation 7.8% • New branches & businesses H1 2014 Volume Price / mix Trading days New sites & acquisitions H1 2015 contributing 2.1% • Good H1
Slide 8: Underlying operating leverage maintained
Underlying operating leverage maintained General Plumbing Contracts Consumer Group Merchanting & Heating H1 2014 EBITA margin 9.8% 3.6% 6.8% 5.6% 6.4% Gross margin 1.7% 1.0% (1.2)% 0.2% 0.8% Operating costs (1.3)% (1.5)% 0.7% (0.2)% (0.7)% H1 2015 EBITA before ∆ in property profits 10.2% 3.1% 6.3% 5
Slide 9: General Merchanting performance summary
General Merchanting performance summary Six months ended 30 June H1 2015 H1 2014 ∆ • Good sales growth from all Revenue £979m £908m 7.8% regions Like-for-like growth 6.7% 14.6% (7.9)ppt • Good cost price management Adjusted EBITA £92m £89m 3.4% EBITA margin 9.4% 9.8% (40) bps and focus on pass-throu
Slide 10: Plumbing & Heating performance summary
Plumbing & Heating performance summary Six months ended H1 2015 H1 2014 ∆ • Re-segmentation on plan with 30 June CPS now consistently showing Revenue £667m £672m (0.7)% positive like-for-like growth Like-for-like growth (2.9)% 7.4% (10.3)ppt Adjusted EBITA £21m £24m (12.5)% • Improving sales growth
Slide 11: Contracts performance summary
Contracts performance summary Six months ended H1 2015 H1 2014 ∆ • Both EBITA and ROCE improved 30 June Revenue £605m £513m 17.9% • Keyline growth remains well Like-for-like growth 13.9% 11.1% 2.8ppt ahead of the market Adjusted EBITA £38m £35m 8.6% EBITA margin 6.3% 6.8% (50) bps • CCF accelerating
Slide 12: Consumer performance summary
Consumer performance summary Six months ended H1 2015 H1 2014 ∆ • Wickes share gains and double- 30 June digit 2-year LFL Revenue £693m £638m 8.6% Like-for-like growth 6.5% 6.8% (0.3)ppt • Good underlying profit growth Adjusted EBITA EBITA margin £41m 5.9% £36m 5.6% 13.9% 30 bps • Range review costs
Slide 13: Strong & sustainable earnings growth
Strong & sustainable earnings growth Six months ended 30 June H1 2015 H1 2014 ∆ • £5m lower property Adjusted EBITA £185m £175m 5.7% profits Net finance cost £(18)m £(13)m (38.5)% • Adverse non-cash Adjusted profit before tax £167m £162m 3.1% currency MTM charge of Adjusted tax £(33)m £(32)m 3.1% £4
Slide 14: Cash flow funding investments & growing dividend
Cash flow funding investments & growing dividend £3m £(31)m • Cash conversion of £49m £(26)m 84% £185m £(10)m £(14)m • Solid working capital management despite £156m Growth capex £60m Acquisitions £14m Contracts growth Dividends £64m Pension contribution £9m £147m Freeholds £45m Use of FCF Financed
Slide 15: Investment plans drive returns
Investment plans drive returns Examples Capex YTD Extending Strong • New TP / Wickes / Toolstation / CCF £20m 1 • Benchmarx implants / showrooms / leadership returns toolhire implants Good • New formats / P&H conversions 2 Investing to grow £25m returns • Distribution centres Re-engineering & Range
Slide 16: Disciplined capital management
Disciplined capital management Group LAROCE movement • 10.5% LAROCE maintained: – increased capital investment 0.1% 0.1% – freehold property acquisitions – contract business growth – very strong 2014 cash flow 10.5% 10.5% • Strong returns from new investments – new branches & implants H1 2014 Increa
Slide 17: Good progress towards medium-term ratios
Good progress towards medium-term ratios Six months ended Medium term H1 2015 H1 2014 YoY ∆ YE 2014 30 June guidance Net debt - £395m £298m £97m £358m Lease debt - £1,429m £1,509m £(80)m £1,469m Lease adjusted debt - £1,824m £1,807m £17m £1,827m LA Gearing - 43.8% 44.1% (30)bps 44.1% Fixed charge co
Slide 18: Reiterate 2015 full year guidance
Reiterate 2015 full year guidance • Mixed inflation outlook • 6-7% sales growth expected in 2015 • Low double digit EBITA growth • Property profits of ~£20m (2014: £26m) • Effective tax rate maintained at ~20% (2014: 19.7%) • Capex expected to be >£200m given freehold property purchases • Dividend g
Slide 19: Strategy Update. John Carter
STRATEGY UPDATE. JOHN CARTER Interim Results. 2015 19
Slide 20: Our growth not constrained by the market
Our growth not constrained by the market • Majority of the markets we compete in are highly fragmented 1 Market • Proliferation of small family-owned businesses fragmentation • Our businesses are #1 or #2 in each of our markets, but with relatively low market shares • Branch network: 2,000 locations
Slide 21: Medium-long term sustainable RMI growth
Medium-long term sustainable RMI growth Smaller 27.8m Only 60% families driving homes maintained to 225,000 new across the a satisfactory households country level per year Source: Office of National Statistics Interim Results. 2015 21
Slide 22: Stable environment for continued investment
Stable environment for continued investment 105 Rolling 12 month housing transaction & mortgage approvals 70 • Property transactions softened Housing transactions (‘000) Mortgage approvals (‘000) following MMR 68 100 66 95 – Lagged effect on RMI in Q2 64 90 62 85 Mortgage Market Review effective Mon
Slide 23: Levers of value creation
Levers of value creation Portfolio Scale management Optimising advantage • Streamlined central network • Supply chain functions Customer • TP expansion & investment • Devolved innovation modernisation • Leverage property management • Improved value • Wickes national footprint capability responsibili
Slide 24: Innovation in our customer propositions
Innovation in our customer propositions General Merchanting Contracts • Branch format trial underway • New Keyline branch operating • Range extended through model trial supply chain investments • Division-wide project tracking • Trade Offers site launched • Sector / product specialists • Benchmarx ‘
Slide 25: Optimising our branch and store network
Optimising our branch and store network Expanding the network Optimising the network Last 18 months delivered: • P&H network • 17 new Travis Perkins branches segmentation programme involving 180 branches • 7 new Wickes stores • More than 100 implants • 50 new Toolstation stores delivered across • 54
Slide 26: Exploiting our structural advantages
Exploiting our structural advantages Supply Chain Property • Creation of unique infrastructure • Management of tail estate • 2 lightside hubs complete • Placing right business in right • 3 of 4 heavyside range centres site • Continuous improvement to • Releasing cash whilst ensuring availability, ra
Slide 27: Empowered management driving performance
Empowered management driving performance • Business Unit and Division management teams strengthened Devolved management 1 • Management teams responsible for strategic planning and operational decisions responsibility • Group provides support, allocates capital, incentivises and monitors performance
Slide 28: Sustainable medium-term revenue growth
Sustainable medium-term revenue growth • Low-single digit market volume 8% growth assumed 6% • Low levels of inflation Sales growth p.a. 1-2% • Structural advantages & 4% 1-2% investment opportunities 0-2% generate consistent market 2% outperformance 2-3% 0% • ~6-7% revenue growth p.a. Market Inflat
Slide 29: Consistent guidance
Consistent guidance • Continue to outperform in majority of our markets • Good operating margin prospects for the Group over the long term • Targeting sustainable low double digit EBITA growth p.a. • Add 200-300bps to lease adjusted ROCE over medium term • Focus on 3 key areas: – Modernise Travis Pe
Slide 30: Questions
QUESTIONS. Interim Results. 2015 30
Slide 31: Appendices
APPENDICES. I. Market indicators II. Revenue analysis III. Adjusted earnings rec. IV. Branch numbers V. Like-for-like sales growth VI. Definitions Interim Results. 2015 31
Slide 32: I. Market indicators
I. Market indicators Site visitors +17pt Consumer confidence +6pt Site reservations +22pt Climate for purchases +12pt Mortgage approvals +2% Equity withdrawal 0% Housing transactions +3% Retail Sales growth +2% Housing prices +3% Architect work load (14)% Construction output +3% Expected workload +9
Slide 33: II. Revenue analysis – six months ended June 2015
II. Revenue analysis – six months ended 30 June 2015 General Merchanting Northern Midlands South West South East Northern Midlands South West South East Geography 20.1 21.9 24.4 33.6 Geography 33.5 17.5 16.5 32.5 Timber Forest Heavyside Lightside P&H / Other Timber Forest Heavyside Lightside P&H / O
Slide 34: III. Adjusted earnings reconciliation
III. Adjusted earnings reconciliation H1 2015 H1 2014 Six months ended 30 June PAT EPS PAT EPS Statutory earnings £127m 51.3p £123m 50.5p Amortisation of intangibles £9m 3.6p £9m 3.6p Tax on amortisation £(2)m (0.7)p £(2)m (0.7)p Adjusted earnings £134m 54.2p £130m 53.4p Interim Results. 2015 34
Slide 35: IV. Branch numbers
IV. Branch numbers 31 December New New 30 June Historical network growth 2014 sites implants Closures Rebrands 2015 2009 2010 2011 2012 2013 2014 H1’15 Travis Perkins 653 7 - - - 660 Benchmarx 119 11 9 - - 139 Opening 1,262 1,303 1,813 1,868 1,896 1,939 1,975 General Merchanting 772 18 9 - - 799 New
Slide 36: V. Like-for-like sales growth
V. Like-for-like sales growth Six months ended General P&H Contracts Consumer Total 30 June 2015 Volume 4.9% (2.1)% 12.1% 10.8% 6.0% Price / mix 1.8% (0.8)% 1.8% (4.3)% (0.3)% Like-for-like sales 6.7% (2.9)% 13.9% 6.5% 5.7% Trading days - - - - - Expansion 1.1% 2.2% 4.0% 2.1% 2.1% Total sales growth
Slide 37: V. Like-for-like sales growth
V. Like-for-like sales growth Like-for-like by quarter Like-for-like by half year Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 H1 H2 H1 H2 H1 2013 2013 2014 2014 2014 2014 2015 2015 2013 2013 2014 2014 2015 General 10.3% 10.1% 16.6% 13.3% 10.9% 11.6% 8.1% 5.3% General 2.8% 10.1% 14.6% 11.3% 6.7% P&H 4.7% 20.5% 13.2% 1.2
Slide 38: VI. Definitions
VI. Definitions Metric Definition EBITA Earnings before interest, tax and amortisation Earning per share (“EPS”) Ratio of net profit after taxation to weighted number of ordinary shares outstanding Adjusted EBITA / EBITA or EPS adjusted for exceptional items and amortisation (see Appendix III for re
Slide 39: VI. Definitions (continued)
VI. Definitions (continued) Metric Definition Site visitors House Builders Federation Survey / monthly / May 2015 / Balance score compared to a year ago Site reservations House Builders Federation Survey / monthly / May 2015 / Balance score compared to a year ago Mortgage approvals Bank of England /
Slide 40: Contact
CONTACT. Download [email protected] the Travis Perkins IR Graeme Barnes | +44 7469 401 819 app for [email protected] iPad Matt Johnson | +44 7584 491 284 vCard [email protected] Interim Results. 2015 40