Annual Report and Accounts - Hemscott IR

T R A V I S P E R K I N S A N N U A L R E P O R T A N D A C C O U N T S 2 0 1 2
Research continues to indicate the clarity and simplicity
of the Wickes and Tile Giant propositions are compelling
for many customers.
Toolstation performed strongly as those stores opened
with our support pre-acquisition moved further towards
maturity. Like-for-like sales are up 21%, significantly
ahead of other multi-channel operators, profits are
approximately 280% higher and the estate has grown by
20 branches during the year.
Overheads were well controlled throughout the
division with the ratio of overheads to sales for Wickes
and Tile Giant increasing by only 0.1% despite turnover
remaining flat. Wickes like-for-like costs fell as a result of
changing the store colleague structure late in 2011 and
from re-targeting their marketing spend.
Plumbing and Heating
2012 2011 Change
£m £m %
Gross turnover 1,632 1,736 -6.0%
Adjusted segment profit 73 80 -8.7%
If the results of Buck and Hickman and 17 P&H
branches divested in 2011 are excluded from the 2011
comparative, turnover has decreased by £21m (1.2%),
whilst net profit fell by £5m (6.3%).
Throughout 2012, trading in both the commercial
and domestic markets has been difficult. The domestic
heating market was subdued all year with the markets for
the key product groups of boilers and radiators 2% and
10% down year-on-year respectively. The ending of the
last phase of government subsidies impacted demand
and new initiatives such as Green Deal, Renewable Heat
Incentive and the energy company ECO commitments
did not have any real impact during the year.
In a low demand market, competition remained
intense and throughout the year decisions were taken
to improve pricing and monitor customer profitability.
In PTS several long standing supply relationships were
re-negotiated or terminated altogether.
The Group has a good record of pre-price increase
stock buying. With sales price deflation in our plumbing
market those opportunities to bolster margins through
buying gains have been considerably more limited.
The industrial businesses of BSS were the strongest
performer in a weakening plumbing market. Some major
contract wins helped protect sales with margins slightly
above last year’s levels due to a number of self-help
measures improving product mix. Good overhead control
resulted in an improvement in overall operating margin.
The domestic business, which includes PTS and
F&P, our wholesale distribution business supplying
second tier merchants, has suffered as a result of a sharp
contraction in the boiler and radiator markets and low
product inflation. Tight competitive conditions have
resulted in a reduction in margins, and management
have taken action to cut costs by restructuring the
network, closing nine branches.
City Plumbing performed well and whilst its likefor-like
turnover is slightly down, it has improved its
gross margin compared with 2011. Our ‘Endeavour’ new
showroom concept has continued to outperform the
rest of the estate and so we will extend their presence
throughout the estate during 2013.
P&H divisional overheads were tightly controlled
with some additional costs being incurred by PTS for
the full year administration of the solus British Gas
contract to whom we are proud to provide an industry
leading service.
Overseas expansion
During the year we have taken our first tentative
step into international markets. In conjunction with
the founder of Toolstation, we have made a small
investment of less than €2m in five Toolstation branches
located in the Netherlands that were previously
franchised to an independent operator. The initial focus
has been on expanding the product range and improving
marketing, but much work still needs to be done. Whilst
we anticipate making further small investments in 2013
and 2014, it will be some time before we are able to
determine whether the venture will be successful.
Investors and lenders
Holders of the Company’s equity are concentrated
primarily in the UK and North America, with North
American investors now holding 26% of the Company’s
shares. We are committed to frequent and open dialogue
with our shareholders and we take a pro-active stance to
ensure we meet with as many of them as possible.
During the year a combination of me, Paul Hampden
Smith and John Carter met with 44 investors holding
55% of our shares at least once. We also met with a
significant number of non-holders as we sought to widen
our investor base.
We find that both investors, members of the analyst
community and our lenders benefit from seeing
our operations first hand. It provides them with an
opportunity to see our sites and talk with the hard
working colleagues who make Travis Perkins such a
strong company. During 2012 we undertook 3 store,
warehouse and branch visits and we intend to continue
this in 2013. In the autumn, once we have completed our
annual strategy review, we expect to combine a site tour
with a strategic update for both investors and analysts.
I reported last year that in difficult markets for
raising finance we had secured a £550m revolving credit
facility that is available to draw down from April 2013.
As with our investors, we think it is important to build
relationships with our banks and other lenders and
so we maintain regular contact throughout the year.
I am pleased to report that the confidence the banks
showed in the Group last year has continued. Following
REPORTS
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