2020 Full Year Results - March 2021 - Travis Perkins PLC
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2020 Full Year Results March 2021
Agenda
Introduction Nick Roberts p3
Financial review Alan Williams p5
Operational review
Nick Roberts p22
& strategic update
Appendices p37
Full Year Results March 2021
Introduction Nick Roberts
2020 - Resilient trading amidst significant uncertainty
Full year earnings impacted by the pandemic but strong recovery in H2
Excellent progress on a number of key initiatives to strengthen the core
of the businesses
Opening up new channels via technology and network changes to
take market share
Accelerated platform for growth and work to define our sustainable
business framework
Announcing today the resumption of the Wickes demerger process
4 Full Year Results March 2021
Financial Review Alan Williams
Key financial highlights
Year ended 31 December 2020 Year-on-year
(£m unless otherwise stated) FY 2020 FY 2019 change
Revenue 6,158 6,956 (11.5)%
Like-for-like revenue growth (7.1)% 3.8% (10.9)ppt
Adjusted EBITA 227 442 (48.6)%
Adjusted earnings per share (pence) 42.4p 112.7p (62.4)%
Adjusting operating items (140) (200)
ROCE 5.5% 10.1% (4.6)ppt
Covenant net debt 40 344 (304)
Dividends per share 0.0p 15.5p
6 Full Year Results March 2021
Revenue impacted by unprecedented conditions
Volumes significantly impacted by the
pandemic but good recovery in H2
Pricing remained robust despite drop in
volumes
Disposals of PF&P Wholesale & Tile Giant
TS Europe consolidation - first full year
Branch closure programme impact c.
(3)% in the year
7 Full Year Results March 2021H2 Revenue recovery after spring lockdown closure
Lockdown
8 Full Year Results March 2021Group gross margins increased due to segment mix
2020 gross
margin
+c. 50bps
2019 gross
margin
Reduced Segmental
Annual volume
Category / P&H business promotional
rebates mix
*Arrows are demonstrative and are not to scale
channel mix mix activity
Overall Group gross margin increased by c. 50 bps:
– Positive segmental mix; 7% increase in sales participation of Retail and Toolstation.
– Lower annual volume rebates due to reduced purchases - expected to be recovered in 2021
– Some adverse movement in category and channel mix; largely offset by reduced promotional activity
– P&H gross margin higher due to better mix of business, accentuated by disposal of PF&P
Group gross margin will be impacted in 2021 by Wickes demerger
9 Full Year Results March 2021EBITA drivers
10 Full Year Results March 2021Restructuring programme driving operational efficiencies
Programme launched to close approximately 190 Merchanting and P&H
branches with focus on smaller sites
Headcount reduction of approximately 2,500, including branch staff and
support functions across all businesses and head office
Annualised gross cost savings of c. £120m. Some reinvestment will be
required at branch level in customer service as volumes recover
Sales retention from closed branches in line with expectations across the
Merchant businesses
Future estate investment to be in larger, high quality assets with more stock
on the ground - focus on continuing to reduce cost to serve
11 Full Year Results March 2021Merchanting - H2 revenue recovery driven by RMI
Significant impact from spring lockdown
Encouraging recovery in H2 led by RMI.
Housebuilding and commercial slower
to recover
FY 2020 FY 2019 Change
Total revenue £3,065m £3,703m (17.2)% Gross margins impacted by lower
annual volume rebates. Expected to
Like-for-like growth (14.0)% 3.3% (17.3)ppt
normalise in 2021
Adjusted operating profit* £152m £284m (46.5)%
Restructuring generated annualised
Adjusted operating margin 5.0% 7.7% (270)bps
cost savings of £90m leaving the
ROCE 7% 12% (5)ppt business well positioned
Branch network 846 984 (138)
*Segmentall adjusted operating profit figures are presented excluding property profits
12 Full Year Results March 2021Toolstation - another year of great progress
Another year of exceptional UK sales
growth despite the disruption of Covid
FY 2020 FY 2019 Change UK branch network expansion resumed at
Total revenue £633m £445m 42.1% pace post initial lockdown with 54 new
Like-for-like growth 22.2% 16.3% 5.9ppt
branches Jun-Dec
Adjusted operating profit* £8m £25m (68.0)%
Adjusted operating margin 1.2% 5.5% (430)bps Toolstation Europe consolidated and
ROCE 2% 7% (5)ppt growing strongly - underlying revenue up
Branch network (UK) 460 400 60 £35m (83%) with 17 new branches
Branch network (Europe) 83 66 17
Segmental operating profit impacted by:
Memo: Europe consolidation
Adjusted operating profit - UK £24m £29m (17.2)%
Product and customer mix
*Segmental adjusted operating profit figures are presented excluding property profits
Higher fulfilment and Covid-19 costs
13 Full Year Results March 2021Retail - model enables further market outperformance
Wickes LFL revenue +5.5%** led by strong
performance in Core DIY +19.3%**
K&B revenue down (27.4)%** impacted by
showroom restrictions
FY 2020 FY 2019 Change Gross margin modestly higher as K&B mix
Total revenue £1,391m £1,342m 3.6% impact offset by Core performance
Like-for-like growth 5.0% 8.6% (3.6)ppt
Costs impacted by:
Adjusted operating profit* £77m £97m (20.6)%
Adjusted operating margin 5.5% 7.2% (170)bps Maintaining safe environments (c. £9m)
ROCE 6% 7% (1)ppt Unproductive K & B labour (c. £7m)
Store network - Wickes 233 235 (2)
Higher customer delivery participation
Store network - Tile Giant 0 94 (94)
2019 figures include £47m of revenue and £0.1m of adjusted operating profit from Tile Giant, which was sold in September 2020.
Tile Giant disposed in September 2020
2020 figures include £31m of revenue and an adjusted operating loss of £(0.2)m, plus the £1.4m profit on sale of the business.
*Segmental adjusted operating profit figures are presented excluding property profits
**On a calendar year basis. For the 52 weeks to 26th December 2020 Wickes like-for-like sales were +5.0% with Core +18.8% and Kitchens &
Bathrooms (27.8)%
14 Full Year Results March 2021Plumbing & Heating - strong H2 recovery
Significant impact in spring lockdown as
installers unable to access customer
properties
Strong H2 recovery driven by domestic
installer activity (RMI) with contract
FY 2020 FY 2019 Change business a little slower
Total revenue £1,069m £1,465m (27.0)%
Restructuring actions to deliver c. £25m
Like-for-like growth (11.2)% (1.7)% (9.5)ppt
annualised cost reduction
Adjusted operating profit* £19m £48m (60.4)%
Adjusted operating margin 1.8% 3.3% (150)bps Better mix of business and cost actions
ROCE 5% 13% (8)ppt driving 12.5% EBITA growth in H2
Branch network 354 375 (21) Successful completion of disposal of
PF&P wholesale
2019 figures include £269m of revenue and £7.1m of adjusted operating profit from PF&P wholesale, sold in January 2020
2020 figures include £28m of revenue and £0.7m of adjusted operating profit, plus the £1.8m profit on sale of the business
*Segmental adjusted operating profit figures are presented excluding property profits
15 Full Year Results March 2021Outstanding free cash flow generation
Excellent free cash flow generation of
£304m
Significant working capital inflow:
Inventory reduced by £97m due to
unwind of Brexit contingency and
network rationalisation
Strong debtor collection
performance throughout the year
Business growth concentrated in
cash sales (Retail, Toolstation)
*Interest cost includes £59m ‘Interest on Lease assets’ recognised under the implementation of IFRS16 - Leases
16 Full Year Results March 2021Significant H2 investment to keep expansion on track
Base capex lower year on year due to
rephasing of fleet replacements in light
(£m) FY 2020 FY 2019 of restructuring
Maintenance (42) (56)
Growth capex driven by Toolstation H2
IT (15) (12)
expansion, TP branch investment and
Growth Capex (51) (53)
Wickes refits
Base capital expenditure (108) (121)
IT spend reflects hardware refresh and
Freehold property (26) (22)
smaller scale, phased modernisation
Gross capital expenditure (134) (143)
developments
Disposals 64 82
Net capital expenditure (70) (61)
Base capex forecast for 2021 of
£90-100m (excluding Wickes)
17 Full Year Results March 2021Property Activity underpins business growth
Freehold activity 2016-2020
Merchant freehold acquisitions focused on
Cumulative cash invested £239m major conurbations, with retail portfolio exit
Cumulative cash from disposals £360m
largely complete
Net cash in £121m
Recent freehold investments built out or in
planning / under construction
Paddington site development under contract
Change in freehold in NBV (£31m)
Excellent progress on sites closed in June:
Cumulative property profits £106m
80% of freeholds and 55% of leaseholds
disposed or under offer
23 of the sites repurposed by other Group
brands including 11 Toolstations
Value of freehold property assets significantly
above £375m NBV
18 Full Year Results March 2021Significant reduction in net debt
FY 2020 FY 2019 Exceptional working capital
Free cash flow (£m) 304 195 performance driving free cash flow
Net freehold transactions 26 42
Receipt of £50m from PF&P wholesale
Acquisitions / disposals 54 (43)
disposal in January
Dividends 0 (116)
Cash payments on adjusting items (65) (90)
Dividend payments suspended in 2020
Other (21) (36)
to preserve liquidity. Intention to
Change in cash or cash equivalents 298 (48)
resume distributions in 2021.
FY 2020 FY 2019
Underlying leverage reduction
Covenant net debt £40m £344m
Prudent decision to agree covenant
Covenant net debt / adjusted EBITDA 0.1x 0.7x
relaxation
Net debt under IFRS16 £1,397m £1,788m
IFRS16 net debt / adjusted EBITDA 2.8x 2.5x
Successful refinancing of 2021 bonds
with long 5 year issuance at 3.75%
*Note - the covenant test under financing agreements is based on ‘frozen GAAP’ before the introduction of IFRS16. Leverage cove nant for
June 2020 was relaxed from 3.0x to 3.5x. It was waived for December 2020 and will be reinstated at 3.0x at June 2021
19 Full Year Results March 2021Wickes demerger
Wickes demerger process has
Significant reduction in Group IFRS16 recommenced given more stable
net debt post-demerger
environment and strong liquidity
position
TP Group TP Group
including excluding Prospectus and circular due to be issued
Wickes Wickes Wickes
late March*
FY2020 FY2020 FY2020
Capitalisation of Wickes with c.£130m
Covenant net debt/(cash) £40m £(130)m £170m as at year end
IFRS16 Lease liabilities £1,327m £749m £578m Wickes Investor Seminar 26th March
Other debt like items £30m £0m £30m
2021
IFRS16 Net debt £1,397m £619m £778m
Targeting EGM and completion at the
end of April
* Subject to FCA approval
20 Full Year Results March 2021Outlook and technical guidance
Outlook:
Long term fundamentals remain robust with positive catalysts from Government
stimulus and strong domestic RMI recovery
Continuation of trends seen in Q4 2020 so far in 2021
Focus on modernising and strengthening core business to deliver
outperformance and long term value for shareholders
Technical guidance:
Effective tax rate of 20%
Base capital expenditure in 2021, excluding Wickes, expected to be £90 - 100m
Property profits around £20m
21 Full Year Results March 2021Operational Review & Strategic Update Nick Roberts
Overview
Strong recovery demonstrates resilience of both business models
and end markets
Accelerated our strategy despite the challenges of the pandemic
Progress made in modernising the business for the future
Group is progressively leaner, more agile and customer focused
23 Full Year Results March 2021Key priorities unchanged
● Customer proposition enhanced
Regeneration of Travis Perkins ● Processes simplified
● Network quality improved
● Network expansion on track
Accelerate Toolstation expansion ● IT Infrastructure replatformed
● Fulfilment capability enhanced
Strengthen
the core
● Technology programme progressed
Deliver an organisational platform fit for
● Strong ESG framework & agenda
the future ● Investment in people & capability
Portfolio
simplification
Successful demerger of Wickes Q2 2021
24 Full Year Results March 2021- strengthening the core
Significant progress on regenerating the General Merchant
Pricing Range & Commercials Empowerment Network
More relevant shelf- Simplified commercial Enhanced local Rationalised network
edge pricing structures decision making
Simplified processes Depth of range More confident and Retained customers
for both branch and capable branch teams
customer
Local choice Refreshed regional /
local leadership teams
25 Full Year Results March 2021- progress towards a modern merchant
Channels Fulfilment Integration
Enhanced website Larger footprint Integration of
with trade account branches for depth kitchens and
management of heavyside joinery into
capability General Merchant
Enabled Click & Regional offer
Collect management of Greater
fleet for capability penetration of
Mobile App now / efficiency trade customer
available to trade base
customers
26 Full Year Results March 2021Winning market share in UK and Europe
Digital capability & multi-channel approach driving market share gains
Rapid evolution of UK ...driving progress on …whilst gaining
business model…. key metrics... momentum in Europe
Network expansion Sales per branch up 25% Adapted operating model quickly
continued since 2016 to offer a “near normal” service
Significantly increased Over 70% of customer during Covid
DC capacity journeys digitally led - driven Multi channel offering and high stock
Replatformed IT/Digital by click and collect +600% yoy availability has proved a significant
infrastructure Improvements in web differentiator in the European market
Trade Credit launched conversion New distribution centre in Lyon will
Digital wallet launched support branch expansion in France
Mobile App in 2021
Over 3m new customers Network expansion delayed but still
Further trade focused 17 new branches in 2020
range development in year
Network expansion continues in 2021
27 Full Year Results March 2021- continuing to improve the business
Driving focus on Opening up new Rationalising cost
quality of sales channels base
● Pricing / ● Online sales up ● Closing lower
Commercial deal 18% to £57m performing
simplification branches
● Segmented ● Increasing strength ● Disposal of low
customers by of bathroom margin PF&P
profitability showroom business
proposition
28 Full Year Results March 2021Specialist Merchants - modernising to extend leadership
Heating & cooling Civils & drainage Interiors & insulation
Market leaders in respective sectors
Networks rationalised. Strong sales retention from branch closures
BIM capability Delivery management system
Expanding TF Solutions Commercial simplification with suppliers
Digital development Simplified pricing and processes
29 Full Year Results March 2021- a thriving digitally led home improvement business
2020 has demonstrated the agility and resilience of the Wickes balanced model
Performance is supported by well developed digital and flexible fulfilment capability
Market share gains and buoyant DIY market underpinned performance
233 stores operate as fulfilment centres for both online and in-store purchases
Colleague engagement remained strong despite COVID disruption
Digitally Enabled Core DIY / Local Trade K&B
Around ⅔ of customers Stock availability challenges closely managed Temporary showroom closures
started their journey Strong performance across broad range of restricted trading
digitally categories Virtual customer journey
Active digital customers TradePro membership continued to grow - now developed & launched
nearly doubled to 4.7m ~550k Lead pipeline supported by pent
Development of digital Customer delivery and click & collect up demand
capability continued participation increased significantly
30 Full Year Results March 2021An organisational platform fit for the future
People Process Systems
Leadership Commercial deals Accelerated progress
strengthened for simplified on digital capability
modernisation
Management More focus on data to Core system
structure delayered drive decisions replacement, starting
with Finance system
Refreshed key Removed significant Better insight derived
leadership positions complexity from from data
through promotion internal and customer
of internal talent processes
31 Full Year Results March 2021Sustainable Business Framework
6 Strong Core Focus
Areas
6 Leading Commitment
Focus Areas
A Supply-Chain Wide
Approach
32 Full Year Results March 2021Good progress in 2020; defining long term targets
Carbon Apprenticeships
Net zero by 2035 (Scope 1 and 2) 783 apprentices 2020; 179 graduated
80% reduction and 20% offset £2.4m invested; 38 different programmes
Set a Scope 3 carbon target by June 2021 Driving greater diversity with 39% female; 66%
under 25
Target of 1,000 more apprentices in 2021
850 Kick Starters to join in 2021
Employee value proposition Diversity & Inclusion
Merchant and P&H businesses now Real Living TP Women, LGBTQ+ and BAME networks now active
Wage employers with leadership sponsors
Significantly enhanced family leave policies Disability on the leadership agenda with a partnership
Weekly “check-in” surveys during pandemic with the Valuable 500
~ 35,000 responses 10 mentees and 10 mentors joined the 30% club
mentoring programme, accelerating development
of women
33 Full Year Results March 2021Building the future through a year of adversity
A Group of market leading businesses with huge potential
Creating a modern merchant Leveraging the strength of the Group
Progressive digital tools and capability Collaboration between businesses
Integrated with branch and fleet operations Seamless experiences for customers
Specialists building on advantaged positions Powerful fulfilment capability
Accelerate growth of Toolstation - UK & Investing in high quality property &
Europe digital assets
Organisational platform fit for the future Continued reduction in cost to serve
34 Full Year Results March 2021Questions
Appendices
I - Sales drivers by division
37 Full Year Results March 2021II - Segmental revenue analysis
Northern Midlands South West South East Northern Midlands South West South East
Timber Forest Heavyside Lightside P&H Timber Forest Heavyside Lightside P&H
Merchanting
Retail
Cash Credit Cash Credit
Collected Delivered Collected Delivered
Northern Midlands South West South East Northern Midlands South West South East
P&H Lightside
Toolstation
P&H
Cash Credit Cash
Collected Delivered Collected Delivered
*Deliv ered includes direct to site
38 Full Year Results March 2021III - Group revenue analysis
Northern Midlands South West South East
Timber Forest Heavyside Lightside P&H
Group
Cash Credit
Collected Delivered
*Deliv ered includes direct to site
39 Full Year Results March 2021IV - Market Lead Indicators
Dec 20
Site visitors Jan 21
(34) pts Consumer confidence
(28)pt
Dec 20
Site reservations Jan 21
(2) pts Climate for purchases
(24) pt
Dec 20
Mortgage approvals Q3 20
54% Equity withdrawal
(2)%
Dec 20
Housing transactions Jan 21
32% Retail Sales growth
7%
Jan 21
Housing prices
6%
Q3 20
Architect work load
+8%
Dec YTD Q1 21
Construction output Expected workload
(12)% (9) pt
Q1 21 Q4 20
Trade confidence New construction orders
(10)pt (13)%
40 Full Year Results March 2021V - Branch numbers
41 Full Year Results March 2021VI - Like for Like sales growth
42 Full Year Results March 2021VII - Definitions
Metric Definition
Operating profit Earnings before results of associates, interest, tax and amortisation of acquisition-related intangible assets
Earning per share (“EPS”) Ratio of net profit after taxation adjusted for minority interests to weighted number of ordinary shares outstanding
Adjusted operating profit /
Operating profit / EPS before adjusting items and amortisation of acquisition-related intangible assets
Adjusted EPS
ROCE Ratio of adjusted operating profit to debt plus equity
Covenant net debt On-balance sheet debt excluding lease liabilities and pension SPV liability
Net debt On-balance sheet debt including lease liabilities
Gearing Ratio of debt to equity plus debt
Fixed charge cover Ratio of adjusted operating profit before depreciation to interest plus lease right-of-use asset depreciation
Net Debt : EBITDA Ratio of Net debt to earnings before adjusting items, interest, tax, depreciation and amortisation
Free cash flow (“FCF”) Net cash flow before dividends, capital expenditure, freehold acquisitions and disposals, pension deficit contributions & fin ancing cash flows
Total Shareholder Return Ratio of opening market price per share to closing market price per share less opening market price per share plus dividends per share during
(“TSR”) the period
WALE Weighted average expiry of property leases
43 Full Year Results March 2021VIII - Definitions (continued)
Metric Definition
Site visitors House Builders Federation Survey / monthly / Dec 2020 / Balance score compared to a year ago
Site reservations House Builders Federation Survey / monthly / Dec 2020 / Balance score compared to a year ago
Mortgage approvals Bank of England / monthly / Dec 20 / number of approvals % change year on year
Housing transactions HM Revenue & Customs / monthly / Dec 2020 / number of houses sold above £40k % change year on year
Housing prices Nationwide / monthly / December 2020 / house price inflation % change year on year
Consumer confidence GFK / monthly / January 2021 / index score
Climate for purchases GFK / monthly / January 2021 / index score
Equity withdrawal Bank of England / quarterly / Q3 2020 / Change in Equity withdrawal as % of net earnings compared to previous quarter
Retail sales growth British Retail Consortium / monthly / January 2021 / LFL % change year on year
Architect work load Mirza and Nacey Survey / quarterly / Q3 2020 / Index - balance score
Construction output Construction output YTD ONS / monthly / December 2020 / % change year on year
Trade confidence Travis Perkins survey materials spend / quarterly movement / Q4 2020 view of Q1 2021
Expected workload Travis Perkins survey work loads / quarterly movement / Q4 2020 view of Q1 2021
New construction orders Office for National Statistics / quarterly SA / Q4 2020 / % change year on year
44 Full Year Results March 2021Contact Matt Worster | +44 7990 088 548 Heinrich Richter | +44 7392 125 417 matt.worster@travisperkins.co.uk heinrich.richter2@travisperkins.co.uk
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