Travis Perkins Plc · LSE:TPK
Travis Perkins — FY2014 Earnings Presentation
46 slides from Travis Perkins's earnings presentation, Mar 3, 2015
Slide 1: 2014 Results
Slide 2: Agenda
Agenda Group highlights John Carter ps Financial review Tony Buffin po Plumbing & Heating John Carter p20 Outlook & investment priorities John Carter p24 Appendices p37 Travis Perkins ® 2014 results - 3 March 2015,
Slide 3: 2014 key messages
2014 key messages _ * Excellent volume growth in TP and Benchmarx capacity increases Significant market 6 “ey * Wickes share gains and further Toolstation growth outperformance * Keyline and CCF material share gains * Stepped up second half growth capex Investing in & * New branches and optimising e
Slide 4: Group performance highlights
Group performance highlights Revenue ° Continued sales growth outperformance growth of £5.6bn . . . 10% EBITA ° Good growth in operating profit growth to £384m 15% adj. ° Strong earnings growth ae growth to 119p . . LAROCE ° Improving return on capital 40bps to 10.4% Dividend ° Dividend growth under
Slide 5: Financial Review
Handles itchen Ranges FINANCIAL REVIEW
Slide 6: Group performance summary
Group performance summary Year-on-year Year ended 31 December 2014 2013 change Revenue £5,581m £5,149m 84% Like-for-like sales growth 7.3% 5.0% 2.3ppt Adjusted EBITA £384m £348m 10.3% Adjusted profit before tax £362m £321m 12.8% Adjusted net profit after tax £291m £249m 16.9% Free cash flow £255m £2
Slide 7: Continued sales growth outperformance
Continued sales growth outperformance Group revenue growth 7.0% 0.3% 0.0% 1.1% £5,581m £5,149m a 2013 Volume Price / mix Days Expansion 2014 LFL sales growth H1 H2 Full-year 2013 0.9% 9.0% 5.0% 2014 10.2% 46% 7.3% 2 year growth 10.8% 13.3% 12.0% Definitions disclosed in Appendix VI Travis Perkins ®
Slide 8: Operating leverage maintained
Operating leverage maintained General Plumbing & Merchanting Heating Contracts Consumer Group 2013 EBITA margin 10.7% 41% 71% 5.3% 68% Gross margin (0.2)% (0.6)% (0.7)% (0.3)% (0.2)% Operating costs (0.4)% 0.5% 0.3% 1.0% 0.2% 2014 EBITA before A in property profits 10.1% 4.0% 6.6% 6.0% 68% Property
Slide 9: General Merchanting performance summary
General Merchanting performance summary year ence 2014 «= «2013,—t—=*A Revenue £1873m £1648m 137% Like-for-like growth 12.9% 65% 64ppt Adjusted EBITA £183m £176m 4.0% EBITA margin 98% 10.7% — (90)bps Underlying EBITA (ex-Property profit) £169m £159m 63% Lease adjusted ROCE 16% 16% - © Travis Perkins
Slide 10: Plumbing & Heating performance summary
Plumbing & Heating performance summary 31 December uit Revenue £1353m £1,366m Like-for-like growth (19)% Adjusted EBITA £65m EBITA margin 48% wrt CrPomy Sm Lease adjusted ROCE 9% (ion, OG aD SUPPLIES Plumbing Trade Supplies =DHS @ City Heating Spares S@irex Definitions disclosed in Appendix VI Travi
Slide 11: Contracts performance summary
Contracts performance summary year ence 2014 2013 A Revenue £1,072m £956m =: 12.1% Like-for-like growth 1.8% 68% 50ppt Adjusted EBITA £72m £68m 59% EBITA margin 6.7% 7.1% — (40)bps Underlying EBITA (exProperty profit) £7Im £67m 6.0% Lease adjusted ROCE 13% 12% Ippt Pipeline & Heating Solutions 6696
Slide 12: Consumer performance summary
Consumer performance summary year ence 2014 «= «2013,—t—=*A Revenue £1283m £1180m 87% Like-for-like growth 6.7% 10% S7ppt Adjusted EBITA £77m £63m 22.2% EBITA margin 6.0% 5.3% 70bps Underlying EBITA (ex-Property profit) £77m £63m 22.2% Lease adjusted ROCE 7% 6% Ippt Wickes TiLE GiANT (TOOLSTATION) T
Slide 13: Strong & sustainable earnings growth
Strong & sustainable earnings growth Year ended 31 December 2014 2013 A Adjusted EBITA £384m £348m 10.3% Net finance cost £(22)m £(27)m 18.5% Adjusted profit before tax £362m £321m 12.8% Adjusted tax £(71)m £(72)m 14% Adjusted profit after tax £291m £249m 16.9% Weighted average shares 244m 241m 12%
Slide 14: Exceptional items have minimal cash impact
Exceptional items have minimal cash impact 2014 2014 2015 2015 Exceptional items (£m) cash EBITA cash EBITA impact impact impact impact Wickes store closure 10 (3) Plumbing & Heating network reconfiguration (4) (29) (3) Other 1 Rinus Roofing disposal 3 (5) Total (1) (23) (6) - Definitions disclosed
Slide 15: Cash flow funding investments & growing dividend
Cash flow w funding investments & growing dividend Networking oe og? * Cash conversion remains £88m £(107)m capital days goo d £384m : : . 2060) — ° Working capital investment £(15)m r . . — 4A days working capital Uses of FCF Beso | ; inabl *£115m growth capex nvestment in sustainable *£16m acquisi
Slide 16: 2014 investment plans progressing well
2014 investment plans progressing well Extending leadership (2) Investing to grow Re-engineering & infrastructure build Travis Perkins ® Strong retu Good rms returns Range of returns 2014 results Property Maintenance Group capex 3 March 2015 Examples Capex YTD * New TP / Wickes / Toolstation * Bench
Slide 17: Disciplined capital management
Disciplined capital management Group LAROCE movement _ 10.4% 10.0% AObps 2013 Increase in Increase in capital 2014 operating profit employed Definitions disclosed in Appendix VI Travis Perkins ® 40bps LAROCE improvement in first year of plan Capital investment stepping up Investments generating good
Slide 18: Good progress towards medium-term ratios
Good progress towards medium-term ratios weenie Mery om 201 Net debt - £358m == £344m £m f Lease adjusted debt - £1,827m £1,818m £9m t LA Gearing - 44.1% 45.6% 15ppt Fixed charge cover 3.5x 3.1x 2.9x 0.2x t LA Debt: EBITDAR 2.5x 2.8x 3.0x ax I Dividend cover 2.5-3.25x 3.1x 3.3x O.2x y Definitions di
Slide 19: Consistent guidance for 2015
Consistent guidance for 2015 ° Mixed inflation outlook ° 2-year LFL growth expected to continue through 2015 ° Low double digit EBITA growth ° Property profits of ~£20m (2014: £26m) ° Effective tax rate maintained at ~20% (2014: 197%) ° Capital expenditure of £170-190m ° Dividend growth above EPS -
Slide 20: Plumbing & Heating
Slide 21: Clear segmentation of customer propositions
Clear segmentation of customer propositions IL, aed : E [ a) | i Plumbing Trade Supplies ° Small-medium local installers ° Larger volume contract customers ° Mix of collected / delivered orders ° Predominantly delivered orders ° Strong showroom, counter & spares sales °* Relationship & account team
Slide 22: Clear segmentation of customer propositions
Clear segmentation of customer propositions Operating model h It ~380 branches ~190 branches 20 new a 180 (10) closures. conversions ~ I Clearl ‘ose 180 branch conversions gicsttis overlap customer offer over 2 years (180) conversions ~310 branches (50) closures Operating model ~80 branches improvem
Slide 23: P&H programme progressing well
P&H programme progressing well Branch conversions City Plumbing Vv training PTS contract v model training Distribution network v improvements Contact centre Vv Project Completion improvements v Travis Perkins ® 2014 results 3 March 2015
Slide 24: Outlook & Investment Priorities
oe, OUTLOOK & INVESTMENT PRIORITIES
Slide 25: Medium-long term sustainable RMI growth
Medium-long term sustainable RMI growth Smaller ; families driving 27.8m Only 60 % 225,000 new homes maintained to households across the a satisfactory per year country level Travis Perkins ®
Slide 26: Market indicators remain encouraging
Market indicators remain encouraging Site reservations Mortgage approvals Housing transactions Housing prices Definitions disclosed in Appendix VI +8pt +15pt (0.1)% O% Travi S Pe rki ns ® 2014 results — 3 March 2015 26
Slide 27: Our growth not constrained by the market
Our growth not constrained by the market * Majority of the markets we compete in are highly fragmented Market *° Proliferation of small family-owned businesses fragmentation Our businesses are #1 or #2 in each of our markets, but with relatively low rnarket shares * Sourcing & supply chain: sourcing
Slide 28: Sustainable medium-term revenue growth
Sustainable medium-term revenue growth ° Low-single digit market volume growth assumed ° Low levels of inflation ° Structural advantages & investment opportunities generate consistent market outperformance ° ~6-7% revenue growth p.a. Travis Perkins ® POW ets Sach 20 8% Sales growth pa. BS oy) as 3s
Slide 29: Stable environment for continued investment
Stable environment for continued investment 400 Mortgage approvals and transactions ° Stable property transactions & mortgage approvals expected in 2015 R12 property transactions ————R'12 mortgage approvals ° Strongest consumer confidence since 2005 — Falling unemployment — Real wage growth — Low in
Slide 30: Significant achievements in our first year
Significant achievements in our first year Customer innovation * New TP format trials underway * Further price investment to grow share ° Heavyside range & sector extensions * Promotional & branded ranges into Wickes * Strong growth from Wickes online * City Plumbing format conversions Travis Perkin
Slide 31: Improving our customer propositions
Improving our customer propositions ~ Sane © TP Format modernisation trials Trade Product Guide progressing well O e T = ° Extended ranges gaining traction si — Catalogue launched in TP Ni — Online extension in Wickes | PICK UP A GOPY TODAY | a >()°/ ° Stronger value across the group — Trade Offers
Slide 32: Network optimisation continuing at pace
— Network optimisation continuing at pace Optimising network ° 100 new branches & implants across the group in 2014 ° 23 new Toolhire locations in TP, Keyline & BSS branches ° Benchmarx expansion continuing a pace (34 new branches) e 125 Endeavour bathroom showrooms now operating Travis Perkins a 20
Slide 33: Scale advantage accelerating
— Scale advantage accelerating Sel ° Cardiff heavyside range centre now open ° Work underway on third site in Tilbury for H2 2015 ° Strong own brand development in 2014 — Existing branded ranges extended — New branded ranges launched Travis Perkins ® advantage HEAVYSIDE RANGE CENTRE. CARDIFF 10PC SD
Slide 34: Portfolio model driving change
oT Portfolio model driving change vet ° Disciplined approach to acquisitions and disposals — Primaflow acquired to complement F&P * Civils & drainage contract specialist _ Rudridge acquired to complement Keyline * Operated from 4 branches in the South East . . . ° Adds ~£50m revenue to Contracts Div
Slide 35: Confident in consistent medium term guidance
Confident in consistent medium term guidance * Continue to outperform in majority of our markets * Good operating margin prospects for the Group ° 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
Slide 36: Questions
\ QUESTIONS.
Slide 37: Appendices
APPENDICES Market growth — Revenue analysis Adjusted earnings rec. Branch numbers Like-for-like sales growth Definitions
Slide 38: Market growth
New - Public Sector New - Public New - Infrastructure Sector 7% New - 7% 3% Infrastructure 3% New - Industrial New - Industrial 1% RMI - Retail 1% RMI - Retail 23% New - Commercial 5% New - 23% Commercial 5% New - Private New - Private Sector Sector 16% 16% RMI - Merchanting - Private Sector RMI - M
Slide 39: Revenue analysis - year ended December 2014
Il. Revenue analysis — year ended 31 December 2014 Northern Geography Timber Cash Payment Delivery General Merchan Geography Category Cash Payment [EMI Coll Delivery il 0% oo = a a ac .) c E = a Travis Perkins ® Midlands Forest Category EEO IEEE Collected 0% 20% Northern 20% South West South Fast 2A
Slide 40: Adjusted earnings reconciliation
Ill. Adjusted earnings reconciliation 2014 2013 Year ended 31 December PAT EPS PAT EPS Statutory earnings £259m 105.9p £265m 109.9p Wickes store closure £(10)m (4.1)p - - P&H network reconfiguration £29m 12.0p - - Rinus Roofing disposal £4m 19p - - Exceptional investment income - - £(9)m (3.9)p Amor
Slide 41: Branch numbers
IV. Branch numbers 6-year network growth Dec-13 Brownfield Acquisition Implants Closures _ Divestment Rebrand Dec-14 Travis Perkins 643 9 10 653, Senchmanx 48 5 53 2009 2010 2011 2012 2013 2014 Benchmarx implants 37 29 66 Rinus Roofing Supplies 14 (14) ~ Opening 1,262 1,303 1813 1868 1,896 1,939 Gen
Slide 42: Like-for-like sales growth
V. Like-for-like sales growth Year ence 2014 General P&H Contracts Consumer Total Volume 10.3% (1.6)% 10.3% 98% 7.0% Price / mix 2.6% (0.3)% 15% (3.1% 03% Like-for-like sales 12.9% (1.9)% 18% 67% 73% Trading days - - - - - Expansion 0.8% 09% 03% 2.0% 11% Total sales growth 13.7% (1.0)% 12.1% 87% 84%
Slide 43: Like-for-like sales growth
V. Like-for-like sales growth Like-for-like by quarter ai a2 @ Of «at a 8 2013 2013 2013 2013 2014 2014 2014 2014 General (21% 71% 103% 101% | 166% 133% 109% 116% P&H (25)% (2.0)% 47% 205%) 132% 12% (51)% (13.3)% Contracts 09% 86% 94% 7.4%) 128% 97% 96% 158% Consumer (73)% 44% 69% 69% 68% 64% 67% Li
Slide 44: 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 / Adjusted EPS EBITA or EPS adjusted for exceptional items and amortisation (see Appe
Slide 45: Definitions (continued)
VI. Definitions (continued) Metric Definition Site visitors 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 New construc
Slide 46: Contact
CO N TACT. Download the Travis Perkins IR Matt Johnson | +44 7584 491 284 app for iPad Graeme Barnes | +44 7469 401 819 vCard Travis Perkins®