Interim Results
Travis Perkins PLC
09 September 2002
9 September 2002
PRE-TAX PROFIT UP 25.2 PER CENT AT £66.0 MILLION
OPERATING PROFIT BEFORE AMORTISATION OF GOODWILL
UP 20.6 PER CENT AT £75.6 MILLION
6 Months 6 Months Increase
30 June 30 June
2002 2001
(Restated)
£m £m %
Turnover 663.8 628.4 5.6
Operating profit before amortisation of goodwill 75.6 62.7 20.6
Profit before taxation 66.0 52.7 25.2
Profit after taxation 43.8 34.6 26.6
Basic earnings per ordinary share 39.1 31.2 25.3
Adjusted earnings per ordinary share before
amortisation of goodwill and profit on sale of
properties 43.5p 35.6 22.2
Interim dividend per share 6.1p 5.4p 13.0
Frank McKay, chief executive, said:
'We are pleased with our performance in the first half, achieved against a
background of market growth, increased contributions from earlier acquisitions
and the positive results of our continuous improvement programmes. While we do
not expect the overall market to be as strong in the second half our focus on
acquisitions and organic growth position us well for further progress.'
Enquiries: Frank McKay Paul Hampden Smith
Chief Executive Finance Director
Tel: 020 7820 0366 Tel: 07712 878242 (mobile)
Tel: 07712 878700 (mobile)
Issued on behalf of Travis Perkins plc by Tavistock Communications Limited
(contact: Keith Payne, tel: 0207 600 2288)
Chairman's Interim Statement
Results
I am pleased to report pre-tax profits for the six months ended 30 June 2002 of
£66.0 million, an increase of 25.2 per cent over the £52.7 million earned in
2001.
Basic earnings per share were 39.1 pence, compared with 31.2 pence in 2001, an
increase of 25.3 per cent. Adjusted earnings per share (prior to goodwill
amortisation and excluding profit from the sale of surplus properties) were 43.5
pence, compared with 35.6 pence in 2001, an increase of 22.2 per cent.
The board has declared an interim dividend of 6.1 pence per share, an increase
of 13 per cent on the 2001 interim dividend of 5.4 pence.
Operating cash flows were 10.2 per cent higher than the first half of 2001 at
£102.7 million. Free cash flow, (cash flow before debt repayments, acquisitions
and capital expenditure) was £71.9 million, an increase of 5.3 per cent over the
£68.3 million generated last year. The free cash was used to fund capital
expenditure and the acquisition of new businesses which together cost £26.8
million.
As a result of borrowings being reduced by £45.1 million in the period to £81
million, gearing at 30 June 2002 fell to 19.8 per cent, compared with 32.6 per
cent at 31 December 2001.
Net interest payable was covered 17.6 times by operating profit before goodwill
amortisation compared with 11 times for the first half of 2001.
I announced at the Annual General Meeting in May, the forthcoming retirement of
Neil Clarke from our Board at the end of December. Neil, who joined the Board
in 1990, is the Group's senior non-executive director as well as Chairman of the
Audit Committee and Chairman of the Remuneration and Nominations Committee.
Over the last twelve years, a period which has seen great change for the
Company, Neil has been a constant source of wise counsel to the Board. His
contribution has been greatly valued by his colleagues who wish him well for the
future.
We have reviewed the structure of Board Sub-Committees and I am pleased to
announce that Michael Dearden will be Chairing the Audit Committee and Peter
Maydon the Remuneration Committee from January 2003. In addition Ted Adams will
take over the Chairmanship of the Pension Scheme Trustee Company.
We are pleased with our performance in the first half, achieved against a
background of market growth, increased contributions from earlier acquisitions
and the positive results of our continuous improvement programmes. While we do
not expect the overall market to be as strong in the second half our focus on
acquisitions and organic growth position us well for further progress.
T. E. P. Stevenson
Chairman
6 September 2002
Chief Executive's Report
Results
Group operating profit before amortisation of goodwill rose 20.6 per cent during
the first half to £75.6 million from £62.7 million in the first half of 2001.
Sales increased 5.6 per cent to £663.8 million from £628.4 million. Like for
like sales were up 4.3 per cent per working day - there were 2 less working days
in 2002. Acquisitions contributed growth of 2.9 per cent. Sales benefited from
continued investment in acquisitions and greenfield sites as well as in the
existing branch network. The return on sales increased to 11.4 per cent from
10.0 per cent as a result of improvements in gross margin and tight control of
overheads.
The 101 Keyline branches acquired in June 1999 continue to improve and we have
met the 8 per cent return on sales target we set ourselves at the time of the
acquisition. Good progress has been achieved by the 38 former Sharpe and Fisher
branches and 9 Broombys branches which are all performing ahead of the financial
targets set when the businesses were first acquired.
Developments
Consistent with our growth strategy, 20 new branches were added through
acquisitions and greenfield site openings in the half year to 30 June 2002. Of
these 15 resulted from acquisitions, the largest being the 6 branch network of
Joseph Spark and Son Ltd in the Manchester area. In addition 5 greenfield sites
were opened, comprising 2 Plumbing & Heating outlets, 2 general merchant outlets
and 1 new insulation centre. Our branch network at 30 June 2002 had increased to
521.
On 1 July we acquired the business of plumbing and heating specialist City
Plumbing Supplies for £38.2 million with an estimated £0.8 million of debt,
thereby adding a further 48 branches to our total network. This acquisition
increases significantly our presence in the plumbing and heating sector. It
will complement the TP Plumbing & Heating brand and the sales of these products
from our generalist branches. A further 4 acquired branches and 2 greenfield
openings have been added since the half year, bringing the present total to 575
branches.
Branch Improvements
We continue to invest in our existing branch network and during the half year we
completed major redevelopment projects at Mitcham, Crowthorne, Malton, East
Kilbride and Preston. Another focus has been the improvement of the lightside
trading areas of DW Archer and Keyline branches.
Projects were carried out at all 11 Archer branches to improve the shop areas
and introduce a wider range of products. Similar refurbishments were also
completed at 15 Keyline branches with the introduction of enhanced ranges of
both lightside and timber and forest products. A similar number of projects
will be completed at other Keyline branches during the second half of the year.
Sales and margins are improving as a result of these initiatives.
Additional investment in landscaping centres has proved beneficial, as sales of
hard landscaping products grew strongly during the first half. Sales of own
brand products also increased at an above average rate, boosted by further
expansion of the product range.
Investment in new milling machinery continued with improvements to our
facilities in the South East which will increase operating efficiencies as well
as the availability of prepared timber in our branches.
Information Technology
Investment in systems has again helped to improve stock, debtor and purchase
invoice processing. Our bad debt charge has now been reduced to its lowest
percentage in recent years. Automated stock replenishment programmes continue
to be expanded and are showing good results, in terms of stock levels and
improved sales as a result of increased product availability.
E-commerce investment is focusing on bespoke projects designed to integrate with
both customers' and suppliers' own systems thereby reducing the need for manual
data entry. While website traffic has increased, actual sales via the internet
remain low. By the end of the first half of 2002 over three-quarters of all
purchase invoices, and almost one third of purchase orders, were exchanged
electronically.
Customer Service
Our constant aim throughout the company is to improve customer service, and to
this end Key Performance Indicator tracking provides information on our
progress. Major changes now being made to our point of sale systems will enable
us to complete trade counter sales more quickly. We continue to invest in both
technology and staff training to ensure the highest standards of service.
Health and Safety
Our policy of recording and analysing all accidents that occur on our premises
is proving informative. This has resulted in modifications to our commercial
vehicle design and in improved personal protective equipment being issued to
staff. During the first half we upgraded the process for inspecting and
maintaining wood working machinery and in addition automated the collection and
analysis of data from risk management audits.
We are confident that these initiatives will lead to further improvements in the
health and safety aspects of our operations.
The Environment
We remain committed to improving our performance on environmental issues and
with this in view we have implemented projects to reduce environmental impacts.
Volatile organic compound emissions have been further reduced by converting
additional plant to aqueous based treatment fluids. In addition we have phased
out entirely our use of chromated copper arsenate fluids, in favour of
alternatives which avoid the use of chrome or arsenic based compounds.
In order to reduce our overall consumption of electricity, we have installed
automated light switching in selected warehouses and are also further reducing
particulate emissions by installing particulate filters on additional commercial
vehicles.
We are moving, in conjunction with our suppliers, towards our target of
improving the percentage of timber purchased that is certified to recognised
standards.
Future Expansion
Our proven strategy of expanding in the UK through the acquisition of
independent merchants and the opening of greenfield sites continues and, to this
end, we have pinpointed gaps in our regional coverage and identified target
acquisitions. At the same time our commitment to continuous improvement is
enabling us to achieve target returns at additional sites more rapidly than
before.
The recent acquisition of City Plumbing Supplies, which marks a significant step
in the enlargement of our Plumbing and Heating business, is totally consistent
with our stated strategy and provides a strong platform for further growth in
this sector. In addition we are developing our specialisations in tool hire,
dry lining and insulation, timber and hard landscaping products.
Staff
On behalf of the board, I would like to express our thanks to all employees for
their contribution to a good start to 2002.
F. J. McKay
Chief Executive
6 September 2002
Consolidated Profit and Loss Account
Six months Six months Year
30 June 30 June 31 Dec
£m 2002 2001 2001
(Restated) (Restated)
(Reviewed) (Reviewed) (Audited)
Turnover 663.8 628.4 1,279.3
Operating profit before amortisation of goodwill 75.6 62.7 129.1
Amortisation of goodwill (5.4) (5.2) (10.5)
Operating profit after amortisation of goodwill 70.2 57.5 118.6
Profit on sale of properties 0.5 0.3 1.4
Profit on ordinary activities
before interest and taxation 70.7 57.8 120.0
Net interest payable (4.3) (5.7) (10.7)
Other finance (costs)/income (0.4) 0.6 1.2
Profit on ordinary activities before
taxation 66.0 52.7 110.5
Tax on profit on ordinary activities (22.2) (18.1) (35.5)
Profit on ordinary activities after taxation 43.8 34.6 75.0
Dividends paid and proposed (6.8) (6.0) (19.3)
Retained profit transferred to reserves 37.0 28.6 55.7
Earnings per ordinary share
Basic 39.1p 31.2p 67.3p
Diluted 38.5p 30.9p 66.7p
Adjusted (before amortisation of goodwill and
profit on sale of properties) 43.5p 35.6p 75.5p
Dividend per ordinary share 6.1p 5.4p 17.2p
Consolidated Balance Sheet
As at As at As at
30 June 30 June 31 Dec
£m 2002 2001 2001
(Restated) (Restated)
(Reviewed) (Reviewed) (Audited)
Fixed assets
Tangible assets 237.0 223.9 226.4
Intangible assets - goodwill 187.2 191.2 187.3
Investments 5.0 5.2 4.9
429.2 420.3 418.6
Current assets
Stocks 140.6 140.9 132.7
Debtors 230.1 241.5 215.7
Properties held for resale 1.4 1.7 1.8
Cash at bank and in hand 65.9 16.5 37.0
438.0 400.6 387.2
Creditors: amounts falling due within one year (334.2) (299.0) (287.4)
Net current assets 103.8 101.6 99.8
Total assets less current liabilities 533.0 521.9 518.4
Creditors: amounts falling due after more than one year (75.0) (125.0) (100.0)
Provisions for liabilities and charges (11.2) (7.6) (8.9)
Net assets excluding pension deficit 446.8 389.3 409.5
Pension deficit (38.6) (12.9) (22.7)
Net assets including pension deficit 408.2 376.4 386.8
Capital and reserves
Called up share capital 11.2 11.2 11.2
Share premium account 62.6 59.8 61.0
Revaluation reserves 31.6 31.4 31.5
Profit and loss account 302.8 272.9 283.1
Total equity shareholders' funds 408.2 375.3 386.8
Minority interests - non equity - 1.1 -
408.2 376.4 386.8
The interim financial statement was approved by the board of directors on
6 September 2002.
Signed on behalf of the board of directors.
F.J. McKay )
P.N. Hampden Smith ) Directors
Reconciliation of Movements in Equity Shareholders' Funds
Six months Six months Year
30 June 30 June 31 Dec
£m 2002 2001 2001
Restated Restated
(Reviewed) (Reviewed) (Audited)
Equity shareholders' funds at 1 January as previously stated 394.1 356.5 356.5
Prior period adjustment as a result of FRS 17 - 7.9 7.9
Prior period adjustment as a result of FRS 19 (7.3) (5.6) (5.6)
Equity shareholders' funds at 1 January as restated 386.8 358.8 358.8
Profit attributable to shareholders of the company 43.8 34.6 75.0
Dividends (6.8) (6.0) (19.3)
Retained profit transferred to reserves 37.0 28.6 55.7
New share capital subscribed 1.1 4.1 4.9
Revaluation of property transferred to current assets - (0.1) (0.3)
Unrealised surplus on revaluation of investment properties - - 0.6
Actuarial gains and losses (16.7) (16.1) (32.9)
Net increase in shareholders' funds 21.4 16.5 28.0
Equity shareholders' funds at 30 June / 31 December 408.2 375.3 386.8
Statement of Total Recognised Gains and Losses
Six months Six months Year
30 June 30 June 31 Dec
£m 2002 2001 2001
Restated Restated
(Reviewed) (Reviewed) (Audited)
Profit attributable to shareholders of the company 43.8 34.6 75.0
Actuarial gains and losses recognised in the pension schemes (23.6) (22.6) (43.6)
Deferred tax 6.9 6.5 10.7
Unrealised surplus on revaluation of investment properties - - 0.6
Revaluation of property transferred to current assets - (0.1) (0.3)
Total recognised gains and losses relating to the period 27.1 18.4 42.4
Prior period adjustment as a result of FRS 17 - - 7.9
Prior period adjustment as a result of FRS 19 (7.3) - -
Total gains recognised since last report 19.8 18.4 50.3
Consolidated Cash Flow Statement
Six months Six months Year
30 June 30 June 31 Dec
£m 2002 2001 2001
(Reviewed) (Reviewed) (Audited)
Net cash inflow from operating activities 102.7 93.2 166.9
Returns on investments and servicing of finance
Interest received 0.5 0.1 0.1
Interest paid (4.1) (7.5) (13.5)
Dividends paid to minority interest - - (0.3)
Net cash flow for returns on investments and servicing of finance (3.6) (7.4) (13.7)
Taxation
UK corporation tax paid (15.1) (10.0) (34.7)
Capital expenditure and financial investment
Purchase of tangible fixed assets (16.7) (16.7) (29.1)
Receipts from sales of tangible fixed assets 1.9 2.0 4.4
Receipts from sale of own shares held 0.1 - 0.5
Net cash outflow for capital expenditure and financial investment (14.7) (14.7) (24.2)
Acquisitions
Purchase of business undertakings (12.1) (11.4) (15.1)
Net cash acquired with business
undertakings - 0.2 0.1
Purchase of minority interest - - (1.1)
Net cash outflow for acquisitions (12.1) (11.2) (16.1)
Equity dividends paid (13.2) (11.6) (17.8)
Cash inflow before financing 44.0 38.3 60.4
Financing
Issue of ordinary share capital 1.1 4.1 4.9
Repayment of bank loans (25.0) (25.0) (25.0)
Issue of unsecured loan notes 2.0 - -
Repayment of unsecured loan notes (0.1) (0.9) (3.3)
Capital element of finance lease rentals (0.1) (0.1) (0.1)
Net cash outflow from financing (22.1) (21.9) (23.5)
Increase in cash in the period 21.9 16.4 36.9
Notes to the Interim Financial Statements
1. Basis of preparation
During the period the group adopted FRS 19 - Deferred Tax. This has resulted in
a restatement of the 31 December 2001 and 30 June 2001 financial statements. In
addition, the 30 June 2001 financial statements have been restated to reflect
the effect of the group's adoption of FRS 17 in its December 2001 financial
statements. Other than stated above, the interim financial statements have been
prepared on the basis of the accounting policies set out in the group's
statutory accounts for the year ended 31 December 2001.
The financial information for the six months ended 30 June 2002 and 30 June 2001
is unaudited and does not constitute statutory accounts as defined in section
240 of the Companies Act 1985. This information has been reviewed by Deloitte &
Touche, the group's auditors, and a copy of their review report appears on page
12 of this Press Release.
The financial information for the year ended 31 December 2001 is extracted from
the audited accounts for that period, as adjusted for the effect of implementing
FRS 19 during 2002. The auditors' report on those accounts was unqualified and
did not contain a statement under s237(2) or (3) of the Companies Act 1985.
2. Taxation
The tax charge on ordinary activities for the six months ended 30 June 2002 has
been calculated at the rate which it is expected will apply for the year ending
31 December 2002.
3. Earnings per ordinary share Six months Six months Year
30 June 30 June 31 Dec
2002 2001 2001
Restated Restated
Basic earnings per ordinary share are calculated from
the following ratio:
Profit on ordinary activities after taxation £43.8 million £34.6 million £75.0 million
Average number of shares in issue 112,090,719 111,114,420 111,454,347
Diluted earnings per ordinary share are calculated
from the following ratio:
Profit on ordinary activities after taxation £43.8 million £34.6 million £75.0 million
Average number of shares in issue
including outstanding options 113,829,918 112,074,271 112,381,453
Adjusted earnings per ordinary share (before amortisation of goodwill and profit
on the sale of properties) are presented in addition to the basic earnings per
ordinary share since, in the opinion of the directors, this presents a better
like-for-like comparison of the earnings of the group between the relevant
periods.
Notes to the Interim Financial Statements
3. Earnings per ordinary share (continued)
Basic earnings per ordinary share may be reconciled to adjusted earnings per
ordinary share as follows:
Six months Six months Year
30 June 30 June 31 Dec
Pence 2002 2001 2001
Restated Restated
Adjusted earnings per ordinary share 43.5p 35.6p 75.5p
Amortisation of goodwill (4.8)p (4.7)p (9.4)p
Profit on sale of properties 0.4p 0.3p 1.2p
Basic earnings per ordinary share 39.1p 31.2p 67.3p
4. Dividend per ordinary share
The interim dividend of 6.1 pence per ordinary share will be paid on 1 November
2002 to shareholders on the register on 4 October 2002. The shares will be
quoted ex-dividend on 2 October 2002.
5. Reconciliation of operating profit to net cash inflow from operating
activities
Six months Six months Year
30 June 30 June 31 Dec
£m 2002 2001 2001
Restated
Operating profit after amortisation of
goodwill 70.2 57.5 118.6
Amortisation of goodwill 5.4 5.2 10.5
Depreciation and other amounts written off
fixed assets 10.2 9.1 19.0
Profit on sale of fixed assets (0.3) (0.3) (0.1)
(Increase)/decrease in stocks (5.6) 1.6 10.8
Increase in debtors (13.4) (21.7) (0.6)
Increase in creditors 36.2 41.8 8.7
Net cash inflow from operating activities 102.7 93.2 166.9
Notes to the Interim Financial Statements
6. Reconciliation of net cash flow to movement in net debt
Six months Six months Year
30 June 30 June 31 Dec
£m 2002 2001 2001
Increase in cash in the period 21.9 16.4 36.9
Cash outflow to repay debt 25.2 25.1 28.4
Non-cash changes (2.0) 0.9 -
Movement in net debt 45.1 42.4 65.3
Net debt at 1 January (126.1) (191.4) (191.4)
Net debt at 30 June / 31 December (81.0) (149.0) (126.1)
7. Analysis of increase in cash and debt
Six months Six months Year
£m 30 June 30 June 31 Dec
2002 2001 2001
Cash at bank and in hand 65.9 16.5 37.0
Bank overdrafts (7.1) (0.1) (0.1)
Bank loans (125.0) (150.0) (150.0)
Finance leases less than 1 year (0.1) (0.2) (0.2)
Unsecured loan notes (14.7) (15.2) (12.8)
Net debt at 30 June / 31 December (81.0) (149.0) (126.1)
8. Post balance sheet event
On 1 July 2002 the company acquired the entire issued share capital of City
Plumbing Supplies Holdings Limited for £38.2 million.
Independent Review Report to Travis Perkins plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2002 which comprises the profit and loss account,
the balance sheet, the cash flow statement, the statement of total gains and
losses, related notes 1 to 8, and the reconciliation of movements in equity
shareholders' funds. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority, which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the UK. A review consists
principally of making enquires of group management and applying analytical
procedures to the financial information and underlying financial data, assessing
whether accounting policies and presentation have been consistently applied
unless otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with UK
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly, we do not express an audit opinion on the interim financial
information.
Review conclusion
On the basis of our review, we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
Deloitte & Touche 6 September 2002
Chartered Accountants
Birmingham
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