Annual Report and Accounts - Hemscott IR

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Finance Director’s Review of the Year FOR THE YEAR ENDED 31 DECEMBER 2012 Paul Hampden Smith Finance Director Financial achievements 2012 has been a year of consolidation as we have continued to manage our businesses so they are well positioned to take advantage of the opportunities that will arise when our markets start to improve. Our balance sheet is stronger, with lease adjusted net debt to adjusted EBITDAR reducing from 3.4 times to 3.2 times, our dividend up by 25% and in January 2013 we have secured a £50m increase in our medium term funding. Investment has been carefully targeted towards projects that give the best short-term returns, in particular Toolstation expansion, our focus on lowering debt has realised a further £155m reduction in underlying debt (before business acquisitions of £24m) and we have made significant progress on the BSS synergy and integration projects. Our operating margin has improved and we have maintained strong cost control; even though RPI annual inflation in 2012 was 3.1% we have reduced our like-for-like overheads by 2.3% whilst continuing to invest in the business. Financial performance The following table shows the Group’s key financial performance indicators: 2012 2011 Adjusted operating profit to revenue 6.7% 6.6% Group adjusted overheads to revenue 23.8% 23.6% Profit before tax growth 16.2% 37.0% Adjusted profit before tax growth 1.1% 36.9% Adjusted earnings per share 95.1p 93.1p Adjusted dividend cover 3.8x 4.7x Free cash flow (note 35) £242m £294m Lease adjusted net debt to adjusted EBITDAR (note 36) 3.2x 3.4x Adjusted pre-tax return on capital (note 37) 11.5% 11.3% 38
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 “Investment has been carefully targeted towards projects that give the best short-term returns, in particular Toolstation expansion.” Financial results Changes in turnover, operating profit and operating margins have been discussed in the Chief Executive’s Review of the year. Net financing costs before exceptional charges have increased by £10m to £27m. The primary cause of the increase was £4m of mark-to-market losses (2011: £4m of gains) from revaluing forward currency contracts taken out during the course of the year to fix the exchange rate at which goods sourced in foreign currency will be purchased. In addition, as highlighted in last year’s report, putting in place the Group’s new borrowing facility increased interest costs by around £4m. The average interest rate during the year was 3.9% (2011: 3.0%). Pre-tax exceptional items of £31m were credited to the income statement (2011: debit £14m) during the year due to: • £15m (2011: £14m) of costs arising from the BSS integration programme, which continues to progress well; • Sub-letting several vacant retail sites, for which £6m of the exceptional onerous lease provisions, established in 2008, were released; • Applying the requirements of the International Financial Reporting Standard relating to acquisitions, which resulted in a £36m non-taxable revaluation gain in respect of the Group’s 30% investment in Toolstation immediately prior to the Group’s acquisition of the remaining 70% of its shares; • Fair valuing the outstanding consideration for Toolstation at the year-end resulted in a £4m credit to the income statement. After exceptional items, profit before tax, rose by £43m to £313m, a 16.2% increase (2011: £270m). The tax charge was £54m (2011: £57m). If the impact of the non-taxable exceptional items is excluded from profit before tax and the £13m (2011: £13m) exceptional deferred tax credit (caused by the 1% corporation tax rate reduction in April 2012) is ignored, the underlying tax charge was £69m (2011: £75m). That represents an effective rate of 24.5% (2011: 26.5%). We expect our corporation tax rate to reduce further in the coming years in line with government announced falls in the statutory tax rate to 23.25% in 2013, 21.5% in 2014 and 21.0% in 2015. The reduction in the effective rate from last year reflects the drop in the statutory tax rate during the year. Basic earnings per share were 20.6% higher at 108.9 pence (2011: 90.3 pence). Adjusted earnings per share (note 11) were 95.1 pence (2011: 93.1 pence). There is no significant difference between basic and diluted earnings per share and between adjusted and diluted adjusted earnings per share. Capital employed and balance sheet Our balance sheet remains strong with over £2bn of net assets and once again our calculations show there were no impairments to the carrying values of goodwill and other intangible assets. Across the Group, our operating REPORTS 39
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Cash Flow Statements FOR THE YEAR E
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NOTES TO THE FINANCIAL STATEMENTS
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NOTES TO THE FINANCIAL STATEMENTS D
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Five Year Record Consolidated incom
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Notice of Annual General Meeting No
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Notes to the Notice of Annual Gener
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Directions to the Annual General Me
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Other Shareholder Information recei
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140 Shareholder Notes
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TRAVIS PERKINS PLC Travis Perkins p
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