Interim Results

RNS Number : 5291I

Travis Perkins PLC

26 July 2012

 



26 July 2012                                                                                                                        

TRAVIS PERKINS PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012

SUCCESSFUL TRADING STANCE IN TOUGH MARKETS, GENERATING IMPROVED OPERATING MARGIN BEFORE PROPERTY PROFITS AND STRONG CASH GENERATION; INTERIM DIVIDEND UP 23%

FINANCIAL HIGHLIGHTS

·         Group revenue up 2.7% at £2,412m, down 0.7% on a like-for-like basis

·         Before property profits adjusted EBITA, up 9.7% to £151m, adjusted PBT up by 7.3% to £137m, and adjusted EPS up 10.7% to 43.5p (note 13)

·         Reported PBT after exceptional items up 25% to £162m

·         Free cash flow generated of £99m

·         Interim dividend of 8p per share up 23%

OPERATING HIGHLIGHTS

·       Exceptional Q2 wet weather conditions impacted heavy-side business

·       Gross margin before synergies increased by 0.5%

·       Continuing market share gains across our business

·       Tight cost control, like-for-like overheads flat

·       Acquisition of Toolstation completed at an expected total cash cost of £107m

·       Heads of terms agreed for investment in Toolstation Europe

	Six months ended 30 June 2012	Year-on-year change	Six months ended 30 June 2011
	£m	%	£m
Revenue	2,411.5	2.7	2,347.2
Adjusted operating profit before property profits*	150.8	9.7	137.5
Adjusted operating profit*	151.3	0.8	150.1
Profit before taxation	161.8	25.2	129.2
Adjusted profit before tax*	137.7	(1.9)	140.4
Adjusted basic earnings per share*	43.7p	(2.2)	44.7p
Basic earnings per share	57.3p	32.9	43.1p
Proposed dividend per share	8.0p	23.1	6.5p

* Throughout these financial statements consistent with the approach last year the term adjusted has been used to signify that the effect of exceptional items, amortisation of intangible assets and the associated tax impacts have been excluded from the disclosure being made.  Full details of the exceptional items for both 2012 and 2011 are given in note 6 and 7.

Geoff Cooper, Chief Executive, commented:

Whilst weather patterns normally average themselves out over any trading period, it has been difficult to ignore the impact on the results of the first half trading of the wettest 3 months since records began. This has inhibited construction activity and particularly constrained turnover in our heavy-side related businesses in a market already struggling to recover to more normal levels.

Despite this, we have, in balancing sales volumes and gross margin, traded sensibly throughout the period across all four divisions, continuing to take like-for-like market share, increasing the Group's gross margin and remaining cautious on costs and capital expenditures.

Forecasting remains very difficult while public sector capital construction spending declines and the burden of re-starting growth relies on a private sector recovery.  Our strong market positions, track record in managing through the cycle, and overall leading scale in building materials leave us better positioned than competitors to deal with the uncertain outlook.  Based on current information, we are happy with consensus expectations for our 2012 financial performance.

Enquiries:

Geoff Cooper, Chief Executive

Paul Hampden Smith, Finance Director

Travis Perkins Plc                                                                   [phone]

David Bick / Mike Feltham / Mark Longson

Square1 Consulting Limited                                                   [phone]

 INTERIM MANAGEMENT REPORT

Summary   Our first half performance has been robust, with overall results in line with our expectations, despite the unseasonably wet weather experienced during the second quarter.  We estimate normal weather conditions would have boosted profits by around £10m.  Our businesses gained further market share, whilst maintaining operating margins and our focus on delivering profitable growth through self help initiatives has continued.

The timings of realising our property profits, which are expected to fall mainly in the second half of the year compared to the first half in 2011, were compensated for by good results from branch network expansion, including the stores we acquired from the administrator of Focus last year, additional synergies arising from the BSS acquisition and the inclusion of the profits of Toolstation, which were consolidated for the first time in these first half results.

We believe that our previous comments on market trends for 2012 have been borne out.  External estimates suggest that overall market volumes have contracted by approximately 5% year-on-year and we fully expect that this rate of contraction will continue for the rest of this year.    Despite this background for the first half, in line with our expectations, we have increased EBITA before property profits by £13m (10%) to £151m (2011: £138m). 

During the first four months of the year like-for-like sales growth was 0.3% against strong comparators last year.  The market slowed during the second quarter resulting in overall like-for-like revenue for the first half being 0.7% lower. 

Cash generated from operations was higher than for the equivalent period last year and despite incurring higher tax and acquisition payments than a year ago we have continued to reduce debt levels.  We remain on target to reduce debt to £450m by the end of the year.

We completed the acquisition of Toolstation on 3 January so it has been fully consolidated into our results since that date.  The estimated total acquisition price, including the expected final payment due in 2014 is £107m, with £42m having been paid to date. 

Financial Performance    With the majority of our 2012 property transactions due to complete during the second half, property profits in the first half of the year were £12m lower than last year.  Even so, adjusted EBITA (after property profits) was £1m or 0.8% ahead of 2011 at £151m and adjusted earnings per share were 43.7p compared with 44.7p last year.  There was no significant difference between basic and diluted earnings per share.

For the six months ended 30 June 2012 group revenue was £2,412m, an increase of £64m (2.7%) compared to the same period last year. The revenue increase was a combination of a 0.7% decline in like-for-like sales, a 2.7% increase from the acquisition of Toolstation, a 2.2% increase from other network expansion, a 2.3% decline from disposals in 2011 and a 0.8% increase from one additional trading day in the period.

The Group's underlying adjusted operating margin before property profits was 0.4% higher year-on-year at 6.3% with the increase in synergies from the BSS transaction contributing 0.3% of this gain. Group gross margin improved by 0.5% of which around half was due to Toolstation, whilst our increased focus on balancing gross margin and market share gains has yielded good results.  The ratio of overheads to sales increased by 0.4%.  Despite no increase in our like-for-like cost base the combination of fixed costs in our consumer and plumbing businesses was spread over lower like-for-like volumes.

With the contract becoming unconditional on the St Pancras development in July and other projects completing later this year, all but £0.5m of our expected £15m of property profits this year will be realised in the second half.  This contrasts with 2011, when £12m of the total years £16m of property profits were recognised in the first half. 

A net credit of £33m of pre-tax exceptional items (2011: debit £5m) arose in the period:

·    Applying the requirements of the Accounting Standard relating to acquisitions resulted in a £35m non-taxable revaluation gain in respect of the Group's investments in Toolstation immediately prior to the Group's acquisition of the remaining 70% of Toolstation's shares;

·    As result of sub-letting several vacant retail sites, £6m of the exceptional onerous lease provisions, established in 2008, were released;

·    £5m (£2011: £4m) of costs arose from the BSS integration programme, which continues to progress well;

·    £3m of discount unwinding on the contingent consideration for Toolstation.

Profit before tax, which includes the net benefit of the exceptional items increased by £33m.

The tax charge was £25.5m (2011: £27.9m).  If the impact of the non-taxable exceptional items is excluded from profit before tax and the £6.3m (2011: £6.3m) exceptional deferred tax credit (caused by the 1% corporation tax rate reduction in April 2012) is ignored, the underlying tax charge was £31.6m (2011: £35.4m). 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 falls in the statutory tax rate.

Achieving a significant reduction in net debt remains a priority, so we are pleased that our continuing focus on improving cash generation has resulted in adjusted free cash flow for the period being ahead of our expectations at £99m (2011: £136m).  At 30 June 2012 the Group's net debt had reduced by £20m to stand at £563m (31 December 2011: £583m) and the ratio of net debt to EBITDA was 1.25x (31 December 2011: 1.30x). 

Overall the combined gross pension deficits for the Group's three defined benefit schemes have decreased by £1m to £44.7m in the 6 months to June 2012.   The beneficial combination of a slightly higher discount rate (0.05%) being applied to liabilities, a lower inflation assumption (0.15%) reducing scheme liabilities and £8.9m of additional contributions was largely offset by a £21m adverse allowance for scheme experience between the 2008 actuarial valuation and the preliminary 2011 actuarial valuation of the Travis Perkins' scheme.   We are progressing with both the September 2011 Travis Perkins and May 2012 BSS triennial valuations.

As we indicated in February, we are committed to reducing dividend cover to around 3 times over the medium term.  We are confident in the Group's prospects and so the Board is recommending a 23% increase in the interim dividend from 6.5 pence to 8 pence.  It will be paid on 12 November to shareholders on the register at close of business on 12 October. 

Markets   In 2012 the economy has remained fragile, "recession" has returned, unemployment and inflation remain high and recovery prospects have receded - with the Eurozone risk unresolved.  Although background macro-economic indicators are weak, our lead indicators look more balanced.  In the first half housing transactions (BOE measure) and mortgage approvals have improved by 7% and 11% respectively when compared with 2011, albeit from a low base, and whilst consumer confidence remains low falling inflation suggests that the pressure on disposable incomes will gradually reduce.

The performance of our end markets has been mixed.  New build has shown signs of improvement with house-builders reporting increased reservation levels and better prices and forward order books.  Contractors and managed services have also performed reasonably well, whilst RMI activity has been relatively stable during the period.  Unsurprisingly new public sector spend has been generally weak as the government cuts take effect, but activity levels in some sectors such as rail, where we have taken some opportunities to make sales, have been better than expected.   Retail markets have been subdued, particularly for bigger ticket items.

Overall, we estimate that merchanting market volumes have declined by 4%, which is in contrast to the consumer markets in which volumes are down by at least 10% year-on-year. 

Sales price inflation across the group has averaged 2% over the period being higher in heavy-side and light-side products and lower in plumbing and heating, especially commodity items.

Operational Performance   Following the divisional restructuring on 1 January, we are now organised into four distinct divisions.  Each of our divisions has made progress in improving underlying operating margin, with the exception of plumbing and heating where the markets have been weak and the economic environment has had the greatest impact.  We estimate that the merchanting boiler market is down by around 6%.

	General Merchanting	Specialist Merchanting	Plumbing & Heating	Consumer	Total
	%	%	%	%	%
2011 operating margin	12.1	4.2	4.8	3.5	6.4
Property disposals	(1.8)	0.1	-	-	(0.5)
2011 operating margin before property	10.3	4.3	4.8	3.5	5.9
Gross margin	(0.1)	0.3	(1.1)	1.2	0.5
Synergies	-	0.4	0.8	-	0.3
Overheads	0.6	0.3	(0.3)	-	(0.4)
2012 operating margin	10.8	5.3	4.2	4.7	6.3

Total revenue has increased by 2.7% driven mainly by the Toolstation acquisition and the 13 ex-Focus stores opened in the second half of 2011.  Overall like-for-like sales per trading day have fallen by 0.7%, due in the main to the trading conditions experienced by Wickes, especially in respect of big ticket items.  In each of our other divisions we have outperformed on like-for-like sales per day, although the rate of growth is lower than in the past as we have successfully placed more emphasis on protecting margins.

	General Merchanting	Specialist Merchanting	Plumbing & Heating	Consumer	Total
	%	%	%	%	%
Volume	(1.6)	(3.7)	0.9	(8.8)	(2.7)
Price	2.8	4.2	(0.1)	3.0	2.0
Like-for-like per day	1.2	0.5	0.8	*(5.8)	(0.7)
Trading day impact	0.8	0.8	0.8	0.6	0.8
Expansion / disposals	0.9	1.9	(6.3)	19.7	2.6
Total revenue change	2.9	3.2	(4.7)	14.5	2.7

*On a proforma basis (including Toolstation) like-for-like sales would be -3.2%.

We continue to focus on our self help projects designed to increase both margins and return on capital, but only where they promise a high return or rapid payback.  Further progress has been made to extend our multi-channel offering.  Our buying and supply chain teams have realised further benefits from direct sourcing, whilst ensuring we achieve the £30m full year synergy target previously announced.

General Merchanting

	2012	2011
	£m	£m
Turnover	725.9	705.2
Segment profit before property profit	78.4	72.4
Property profit	0.1	12.5
Segment profit after property profit	78.5	84.9

In achieving like-for-like sales growth of 1.2%, the General Merchanting division has continued to outperform both national and independent merchants and as a result has gained additional market share.  Our greater focus on customer profitability and greater leverage of our central distribution store opened last year have enabled us to largely protect gross margin, which declined by just 0.1% compared with last year.

Anticipating the level of market volumes, we have renewed our efforts to reduce overheads.  Whilst many of our small branches operate with an optimal headcount and distribution structure, which makes finding further efficiencies more difficult, the general merchanting management have been able to find cost savings by reducing hours worked and continuing to increase distribution vehicle efficiency.

The improving environment for house-builders has been reflected in our sales to national customers including house-builders and contractors, which have increased significantly compared to 2011.

Whilst much of our focus has been on maximising the benefit from projects undertaken in previous years, new initiatives have been implemented in the general merchanting division. 

We are now piloting the first stage of a new website that improves the customer experience by improving product data, enhancing the search capabilities and giving greater credit account management functionality.  By early 2013 the new site will be fully transactional and will give our customers the opportunity to purchase approximately 10,000 products on-line.

Our light-side offering is being revamped so that we have a standard format across the estate.  For those sites where the fit-out has been completed, we are seeing increased light-side sales and better profitability.

The quality of our managed service business has been recognised by Chelmer Housing which awarded us and Wrekin Housing Trust a "Partnering Initiative of the Year "award at the H&V News awards.  Even though this is a very successful business we continue make improvements.  Currently we are looking to introduce some own brand and core group products into this market.  With the addition of our newly opened Gateshead store, we now operate 35 standalone managed service branches.

Cross selling initiatives are an important driver of group profits.  Eighty-five of our general merchanting branches now have Tile Giant tile displays, with the early pilots showing a significant level of sales.

Tool-hire sales are substantially ahead of last year.  Despite the weather, in May we achieved a record month for sales and margin from our own equipment hire.

Specialist Merchanting

	2012	2011
	£m	£m
Turnover	293.2	284.1
Segment profit before property profit	15.2	11.8
Property profit	0.4	-
Segment profit after property profit	15.6	11.8

Following a positive first quarter for the Specialist Merchanting division in terms of like-for-like sales growth, quarter 2 was affected by poor weather which left like-for-like sales growth for the first half +0.5%. The business continues to manage closely variable cost levels to ensure they match on going changes in sales patterns.  In addition to servicing its own customers, the division continues to provide opportunities for the General and Consumer divisions to grow sales by making specialist products available, through internal supply, to their respective customers.

Plans in Keyline to balance the record levels of market share growth achieved in 2011, in favour of margin growth successfully contributed to an overall gross margin improvement for the division of 0.3% compared to 2011.  New business opportunities have been explored and further progress has been made towards growing sales in its target Rail and Utility sectors.  Keyline has also removed administration from branches and based it in two centres of expertise resulting in improved standards, lower costs and more selling time in branches.

The new branches added in Benchmarx last year by implanting within Travis Perkins sites continued to make progress and the business traded ahead of expectations in H1 on the back of good like-for-like sales growth. CCF has continued to increase like-for-like sales despite some contracts being delayed by the weather.  The business has launched a successful on-line insulation offering and the enlarged branches at Southampton and Heathrow are performing ahead of plan.  CCF continues to lead the Group's initiative in using hand held technology for deliveries and fleet and improving the visibility of delivery times for customers. This system of hand held terminals is in operation in all CCF branches and has been recently introduced into Benchmarx to support our service to contract customers.

Consumer     

	2012	2011
	£m	£m
Turnover	587.5	513.2
Segment profit before property profit	27.5	18.2
Property profit	-	-
Segment profit after property profit	27.5	18.2

Lower consumer confidence and poor weather resulted in our like-for-like volumes falling by 8.8% in the Consumer division.  However, overall turnover for the division has increased by 14.5%, driven mainly by Toolstation and the thirteen ex- Focus stores.

Sales in Wickes rose as a result of the new stores acquired last year, which have traded significantly ahead of the targets we set at the time.  Whilst our new stores have given us more market share, the like-for-like estate also increased its market share from 2011 levels despite our competitors getting a greater sales benefit from the closure of Focus in May 2011.

Gross margins before the impact of the lower gross margin Toolstation business (which reduces divisional gross margin by 0.5%) have improved by 1.6% through a combination of price control, better sourcing, improved terms and sales mix net of selectively targeted investment in pricing in some product areas.

Good cost control has been exercised by the consumer division team during 2012.  The ratio of overheads to sales has remained flat despite lower like-for-like revenue and a high proportion of fixed costs. 

Staff costs have benefited from the simplification of the Wickes' store team structures undertaken in the second half of last year.  Also, steps have been taken to alleviate the rent burden through reducing the footprint of some of our larger less profitable Wickes locations by sub letting part of them to other retail organisations; we have also relocated a number of stores to smaller sites.  Both of these programmes will continue to be an area of focus.

Toolstation has performed strongly and profits continue to grow.  Year-on-year total sales are up 35.8%, with like-for-like sales growing strongly.  We have continued to invest in the business opening a further 11 stores in the first half taking the total up to 114 at 30 June.

Plumbing & Heating

	2012	2011
	£m	£m
Turnover	804.9	844.7
Segment profit before property profit	34.0	40.3
Property profit	-	0.1
Segment profit after property profit	34.0	40.4

If the results of Buck and Hickman and 17 P&H branches divested in 2011 are excluded from the 2011 comparative, turnover has increased by £16m (2.0%), whilst net profit fell by £5m.

The plumbing and heating markets volumes have been relatively flat.  In addition cost inflation has been low so the opportunities to generate buying gains by stocking up in advance of price increases has been limited.   A combination of mix and pricing pressure contributed to a 1.1% reduction in gross margins when compared with 2011.

In PTS like-for-like sales performance has improved through the first half of 2012 despite very low inflation.  We have benefited from the British Gas contract which commenced during the second quarter of 2011.  Intense price competition in the domestic P&H marketremains a key issue, but the business has deliberately sought to reduce its exposure to low margin business.  The markets remain tough especially in the social housing sector.  However, industry statistics show we have made share gains in the boiler and radiator markets and our service to British Gas continues at industry leading standards.

Our industrial business, BSS Industrial has continued to perform strongly versus a weakening market. Margin has held up well due to self help measures improving product mix.  BSS continues to outperform the market and has had some notable contract wins at Heathrow terminals 2A and 2B.  Further progress has been made in our drainage business.  At 30 June we operated from 23 sites, including 22 implants, and we will be opening two more during August.  The introduction of Tool-hire into five sites has proved to be successful and further implants will be opened in the second half. 

City Plumbing has consistently outperformed its competition and has outperformed in major categories of boilers, radiators and bathrooms. The roll out of City Heating Spares continues; we now operate from over 80 locations and this is producing a significant outperformance in the heating spares market.  The Endeavour showroom concept has now been introduced to 27 showrooms across the City Plumbing estate and has received excellent feedback from trade customers and retail customers alike.  The new showrooms are significantly outperforming the rest of the estate, but we have also seen a spin-off benefit in those stores.

The synergy programme continues and we fully expect to achieve our £30m target this year (£24m buying and £6m overheads).  New cross selling opportunities have been identified that will enhance our customer proposition and we are now looking at further global sourcing and major tenders for the supply of both boilers and radiators.

The roll out of a new POS system into PTS commenced during the first half; we now have 58 branches successfully trading on the new platform.  The roll out programme is expected to continue for the next 15 months, during which time we will be planning and developing systems ready to implement in BSS Industrial during late 2013 and into 2014.

Our work on leveraging the strength of our own brand products has continued.  The popular Scruffs safety-wear range, supplied by Birchwood Price Tools, has replaced ranges previously stocked in Wickes and Travis Perkins; sales have exceeded our expectations.

Expansion   We have taken our first small step in overseas markets, having signed heads of terms to invest in the five branch Dutch franchise of Toolstation.   We will be working with the founder of the UK Toolstation business to develop and test the robustness of the model before determining its suitability for a wider expansion in the Euro area.

With our aim of increasing our return on capital, we have been more selective when making investments to improve our proposition.  At 30 June we operated from 1,887 branches (including 12 Rinus Roofing sites) an increase of only 19 in the first half.   Most of our expansion activity was focused on Toolstation where usually new branches achieve profitability within a year and have an above group average return on incremental capital employed.

July Trading   The continued poor weather has resulted in July trading following the trend of the second quarter with like-for-like sales per day being 2.7% lower than last year.

Principal Risks and Uncertainties  The principal risks and uncertainties faced by the Group have been and are expected to remain consistent with those described on pages 36 and 37 of the 2011 Annual Report and Accounts.  Details are provided of risks relating to Market Conditions, Competitive Pressures, Information Technology, Employees, Integration of Businesses, Supplier Dependency and Pension Scheme Funding.

Outlook and Strategy    Latent demand in the markets we serve continues to increase because in the current economic climate many projects are being scaled back or deferred until lead indicators show that prospects are improving.

In its most recent forecast the Construction Products Association ("CPA") estimated that construction volumes will fall by around 4.5% this year a significant movement from its expectation in the spring.  The sectors most affected are non-private RMI, commercial and industrial and infrastructure.  It is now clear that the economic recovery is going to be delayed with expectations being that markets will remain relatively flat through 2013 before growth returns in 2014. 

In the second half of 2012 lower inflation may help consumer confidence and the lagged effect of increased housing transactions in the first half should manifest itself in the final quarter.

Our focus on improving operating margins and increasing return on capital has been rewarded during the first half and we believe that it will enable us to continue to outperform our overall market for the rest of the year.  Overall our outlook for the year remains unchanged as we expect our gross margin and overhead actions to mitigate the slightly weaker market volumes and we remain confident that based upon our best view of the information available to us our results will meet the 2012 full-year consensus expectations.

The Interim Management Report has been prepared solely to provide additional information to shareholders as a body to assess the Group's strategies and the potential for those strategies to succeed, and should not be relied on by any other party for any other purpose.

The Interim Management Report contains forward-looking statements and these statements:

·      have been made by Directors in good faith based on the information available to them up to the time of their approval of this report; and

·      should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.

Condensed consolidated income statement

	Six months ended  30 June 2012 (Reviewed) £m	Six months ended  30 June 2011 (Reviewed) £m	Year  ended 31 Dec 2011 (Audited) £m
Revenue	2,411.5	2,347.2	4,779.1
Operating profit before amortisation and  exceptional items	151.3	150.1	313.2
Exceptional items (note 6)	0.9	(3.5)	(9.8)
Operating profit before amortisation and after exceptional items	152.2	146.6	303.4
Amortisation of intangible assets	(8.7)	(6.5)	(12.9)
Operating profit	143.5	140.1	290.5
Exceptional investment income (note 6)	35.3	-	-
Net finance costs before exceptional items (note 5)	(13.6)	(9.7)	(16.5)
Exceptional items (note 6)	(3.4)	(1.2)	(4.4)
Net finance costs after exceptional items	(17.0)	(10.9)	(20.9)
Profit before tax	161.8	129.2	269.6
Tax before exceptional tax credit	(31.6)	(35.4)	(74.5)
Exceptional effect of reduction in corporation tax rate	6.3	6.3	12.6
Tax (charge) / credit on exceptional items	(0.2)	1.2	4.7
Tax (note 7)	(25.5)	(27.9)	(57.2)
Profit for the period	136.3	101.3	212.4
Earnings per share (note 8)
Basic	57.3p	43.1p	90.3p
Diluted	55.3p	41.7p	87.3p
Total dividend declared per share (note 9)	8.0p	6.5p	20.0p

 

All results relate to continuing operations. 

Condensed consolidated statement of comprehensive income 

	Six months ended 30 June 2012 (Reviewed)	Six months ended 30 June 2011 (Reviewed)	Year ended 31 Dec 2011 (Audited)
	£m	£m	£m
Profit for the period	136.3	101.3	212.4
Cash flow hedges: Losses during the period	(0.8)	(5.5)	(4.6)
Transferred to income statement	1.0	3.8	2.8
	0.2	(1.7)	(1.8)
Actuarial losses on defined benefit pension schemes	(13.4)	(1.6)	(49.8)
	(13.2)	(3.3)	(51.6)
Amortisation of cash flow hedge cancellation payment	2.0	2.1	4.2
Tax relating to components of other comprehensive income	2.7	0.3	7.1
Other comprehensive loss for the period	(8.5)	(0.9)	(40.3)
Total comprehensive income for the period	127.8	100.4	172.1

Condensed consolidated statement of changes in equity

Six months ended 30 June 2012
	Issued share capital	Share premium account	Merger reserve	Revaluation reserve	Hedging reserve	Own shares	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2012 (Audited)	24.4	480.8	326.5	20.8	(5.1)	(75.2)	1,335.6	2,107.8
Profit for the period	-	-	-	-	-	-	136.3	136.3
Cash flow hedges	-	-	-	-	0.2	-	-	0.2
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(13.4)	(13.4)
Amortisation of cash flow hedge cancellation payment	-	-	-	-	2.0	-	-	2.0
Tax relating to components of other comprehensive income	-	-	-	-	(0.5)	-	3.2	2.7
Total comprehensive income for the period	-	-	-	-	1.7	-	126.1	127.8
Dividends	-	-	-	-	-	-	(32.1)	(32.1)
Issue of share capital	-	2.6	-	-	-	0.4	-	3.0
Own shares	-	-	-	-	-	6.6	(6.6)	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.1)	-	-	0.1	-
Foreign exchange differences	-	-	-	-	-	-	(0.3)	(0.3)
Deferred tax rate change	-	-	-	(2.1)	-	-	-	(2.1)
Credit to equity for equity-settled share based payments	-	-	-	-	-	-	9.9	9.9
At 30 June 2012 (Reviewed)	24.4	483.4	326.5	18.6	(3.4)	(68.2)	1,432.7	2,214.0

Condensed consolidated statement of changes in equity (continued)

 

Six months ended 30 June 2011
	Issued share capital	Share premium account	Merger reserve	Revaluation reserve	Hedging reserve	Own shares	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2011 (Audited)	24.2	471.5	325.9	21.3	(6.9)	(83.4)	1,199.2	1,951.8
Profit for the period	-	-	-	-	-	-	101.3	101.3
Cash flow hedges	-	-	-	-	(1.7)	-	-	(1.7)
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(1.6)	(1.6)
Amortisation of cash flow hedge cancellation payment	-	-	-	-	2.1	-	-	2.1
Tax relating to components of other comprehensive income	-	-	-	-	(0.1)	-	0.4	0.3
Total comprehensive income for the period	-	-	-	-	0.3	-	100.1	100.4
Dividends	-	-	-	-	-	-	(23.5)	(23.5)
Issue of share capital	-	0.8	0.1	-	-	-	-	0.9
Own shares	-	-	-	-	-	0.2	(0.2)	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.1)	-	-	0.1	-
Realisation of revaluation reserve in respect of property disposals	-	-	-	(1.1)	-	-	1.1	-
Deferred tax rate change	-	-	-	-	-	-	(2.1)	(2.1)
Credit to equity for equity-settled share based payments	-	-	-	-	-	-	8.0	8.0
At 30 June 2011 (Reviewed)	24.2	472.3	326.0	20.1	(6.6)	(83.2)	1,282.7	2,035.5

Condensed consolidated statement of changes in equity (continued)

Year ended 31 December 2011
	Issued share capital	Share premium account	Merger reserve	Revaluation reserve	Hedging reserve	Own shares	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2011 (Audited)	24.2	471.5	325.9	21.3	(6.9)	(83.4)	1,199.2	1,951.8
Profit for the year	-	-	-	-	-	-	212.4	212.4
Cash flow hedges	-	-	-	-	(1.8)	-	-	(1.8)
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(49.8)	(49.8)
Unamortised cash flow hedge cancellation payment	-	-	-	-	4.2	-	-	4.2
Tax relating to components of other comprehensive income	-	-	-	-	(0.6)	-	7.7	7.1
Total comprehensive income for the year	-	-	-	-	1.8	-	170.3	172.1
Dividends	-	-	-	-	-	-	(38.8)	(38.8)
Issue of share capital	0.2	9.3	0.6	-	-	8.2	(7.1)	11.2
Realisation of revaluation reserve in respect of property disposals	-	-	-	(1.1)	-	-	1.1	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.3)	-	-	0.3	-
Deferred tax rate change	-	-	-	0.9	-	-	-	0.9
Foreign exchange differences	-	-	-	-	-	-	(0.1)	(0.1)
Credit to equity for equity-settled share based payments	-	-		-	-	-	10.7	10.7
At 31 December 2011 (Audited)	24.4	480.8	326.5	20.8	(5.1)	(75.2)	1,335.6	2,107.8

Condensed consolidated balance sheet

	As at 30 June 2012 (Reviewed) £m	As at 30 June 2011 (Reviewed) £m	As at 31 Dec 2011 (Audited) £m
ASSETS
Non-current assets
Property, plant and equipment	573.6	532.8	562.6
Goodwill	1,809.1	1,702.9	1,706.2
Other intangible assets	433.5	404.9	388.9
Interest in associates	5.6	48.1	51.3
Derivative financial instruments	34.5	46.9	40.3
Investment property	0.4	0.4	0.4
Available-for-sale investments	2.4	1.5	1.5
Retirement benefit asset	11.5	39.0	19.3
Total non-current assets	2,870.6	2,776.5	2,770.5
Current assets
Inventories	644.2	607.5	596.0
Trade and other receivables	782.2	816.3	743.0
Derivative financial instruments	1.5	0.6	3.1
Cash and cash equivalents	60.6	81.0	78.6
Total current assets	1,488.5	1,505.4	1,420.7
Total assets	4,359.1	4,281.9	4,191.2

Condensed consolidated balance sheet (continued)

	As at 30 June 2012 (Reviewed) £m	As at 30 June 2011 (Reviewed) £m	As at 31 Dec 2011 (Audited) £m
EQUITY AND LIABILITIES
Capital and reserves
Issued capital	24.4	24.2	24.4
Share premium account	483.4	472.3	480.8
Merger reserve	326.5	326.0	326.5
Revaluation reserve	18.6	20.1	20.8
Hedging reserve	(3.4)	(6.6)	(5.1)
Own shares	(68.2)	(83.2)	(75.2)
Retained earnings	1,432.7	1,282.7	1,335.6
Total equity	2,214.0	2,035.5	2,107.8
Non-current liabilities
Interest bearing loans and borrowings	194.4	634.7	598.2
Derivative financial instruments	5.7	8.4	5.9
Retirement benefit obligations (note 4)	56.2	54.4	65.0
Long-term provisions	23.5	38.2	28.9
Long term other payables	54.6	-	-
Deferred tax liabilities	93.9	103.3	97.4
Total non-current liabilities	428.3	839.0	795.4
Current liabilities
Interest bearing loans and borrowings	426.4	138.9	60.3
Unsecured loan notes	3.3	3.3	3.3
Derivative financial instruments	-	0.4	-
Trade and other payables	1,149.7	1,126.5	1,088.3
Tax liabilities	77.5	84.1	75.9
Short-term provisions	59.9	54.2	60.2
Total current liabilities	1,716.8	1,407.4	1,288.0
Total liabilities	2,145.1	2,246.4	2,083.4
Total equity and liabilities	4,359.1	4,281.9	4,191.2

The interim financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on 25 July 2012 and signed on its behalf by:

G. I. Cooper		P. N. Hampden Smith
Chief Executive		Finance Director

 Condensed consolidated cash flow statement

	Six months ended 30 June 2012 (Reviewed) £m	Six months ended 30 June 2011 (Reviewed) £m	Year ended 31 Dec 2011 (Audited) £m
Operating profit before amortisation and exceptional items	151.3	150.1	313.2
Adjustments for:
Depreciation of property, plant and equipment	33.9	31.3	63.9
Other non cash movements	7.0	7.5	13.9
Losses of associates	-	0.6	0.6
Gain on disposal of property, plant and equipment	(1.1)	(13.0)	(17.6)
Operating cash flows before movements in working capital	191.1	176.5	374.0
Increase in inventories	(26.8)	(34.8)	(36.1)
Increase in receivables	(37.5)	(111.7)	(62.0)
Increase in payables	36.5	135.0	107.1
Payments on exceptional items	(4.9)	(9.1)	(17.8)
Payments to the pension schemes in excess of the charges to profits	(8.9)	(8.4)	(20.1)
Cash generated from operations	149.5	147.5	345.1
Interest paid	(12.5)	(13.2)	(24.2)
Income taxes  (paid) / received	(30.3)	8.2	(26.3)
Net cash from operating activities	106.7	142.5	294.6
Cash flows from investing activities
Interest received	0.1	0.3	0.7
Proceeds on disposal of property, plant and equipment	7.0	2.3	15.0
Purchases of property, plant and equipment	(44.5)	(43.3)	(109.2)
Disposal of business	-	-	26.9
Interests in associates	(1.8)	(1.1)	(2.3)
Acquisition of businesses net of cash acquired	(23.4)	(9.3)	(9.9)
Net cash used in investing activities	(62.6)	(51.1)	(78.8)
Financing activities
Proceeds from the issue of share capital	2.9	0.9	10.6
Bank facility fees paid	-	-	(6.1)
Payment of finance lease liabilities	(0.7)	(0.9)	(1.6)
Decrease in bank loans	(32.2)	(50.3)	(152.2)
Dividends paid	(32.1)	(23.5)	(38.8)
Net cash from financing activities	(62.1)	(73.8)	(188.1)
Net (decrease) / increase in cash and cash equivalents	(18.0)	17.6	27.7
Cash and cash equivalents at beginning of period	78.6	50.9	50.9
Cash and cash equivalents at end of period	60.6	68.5	78.6

Notes to the interim financial statements

1.      General information and accounting policies

The Interim financial statements have been prepared on the historical cost basis, except that derivative financial instruments are stated at their fair value. The condensed Interim financial statements include the accounts of the Company and all its subsidiaries ("the Group").

Basis of preparation

The financial information for the six months ended 30 June 2012 and 30 June 2011 is unaudited. This information has been reviewed by Deloitte LLP, the Group's auditors, and a copy of their review report appears on page 31 of this interim report. The financial information for the year ended 31 December 2011 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2011 as prepared under IFRS has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The unaudited interim financial statements for the six months ended 30 June 2012 have prepared in accordance with IAS 34 "Interim Financial Reporting" and have been prepared on the basis of IFRS's as adopted by the European Union.

Management is currently of the opinion that the Group's forecasts and projections show that the Group should be able to operate within its banking facilities and comply with its banking covenants. The Group is however exposed to a number of significant risks and uncertainties, which could affect the Group's ability to meet management's forecasts and projections, and hence its ability to meet its banking covenants. The directors believe that the Group has the flexibility to react to changing market conditions and is adequately placed to manage its business risks successfully despite the uncertain economic outlook and challenging macro economic conditions. After making enquiries, the directors have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis has been adopted in preparing the interim financial information.

The accounting policies adopted by Travis Perkins plc are set out in the 2011 full year financial statements, which are available on the Travis Perkins web site www.travisperkinsplc.com. These accounting policies have been consistently applied in all the periods presented. There has been no material impact on these financial statements from changes in accounting standards during the period.

Impacts of standards and interpretations in issue but not yet effective

At the date of authorisation of these condensed interim financial statements, the following standards and interpretations, which have not yet been applied in these financial statements, were in issue, but not yet effective:

·  IAS 28 Investments in Associates and Joint Ventures (2011)  

·  IFRS 9 Financial Instruments (2009)

·  IFRS 10 Consolidated Financial Statements

·  IFRS 11 Joint Arrangements

·  IFRS 12 Disclosure of Interests in Other Entities

·  IFRS 13 Fair Value Measurement

The Directors anticipate that adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group.

2.      Business segments

On 1 January 2012 for management purposes, the Group was re-organised into four operating divisions - General Merchanting, Specialist Merchanting, Consumer and Plumbing & Heating. These divisions are now the basis on which the Group reports its primary segment information. Prior period segment information has been restated to show comparable results for the four divisions.  Segment results include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Information regarding the Group's operating segments is reported below. Amounts reported conform to the requirements of IFRS 8. 

Segment information

Six months ended 30 June 2012

	General Merchanting £m	Specialist Merchanting £m	Consumer £m	Plumbing & Heating £m	Unallocated £m	Consolidation £m
Revenue	725.9	293.2	587.5	804.9	-	2,411.5
Result
Segment result before synergies, exceptional items and amortisation of goodwill	78.1	14.1	27.6	21.4	(4.1)	137.1
Synergies arising from the acquisition of BSS	0.4	1.5	(0.1)	12.6	(0.2)	14.2
Segment result pre-exceptional items and amortisation	78.5	15.6	27.5	34.0	(4.3)	151.3
Amortisation of intangibles	-	-	-	(8.7)	-	(8.7)
Exceptional items	-	(0.1)	6.0	(5.0)	-	0.9
Segment result	78.5	15.5	33.5	20.3	(4.3)	143.5
Investment income	-	-	35.3	-	-	35.3
Finance income	-	-	-	-	6.7	6.7
Finance costs	-	-	(3.4)	-	(20.3)	(23.7)
Profit before taxation	78.5	15.5	65.4	20.3	(17.9)	161.8
Taxation	-	-	-	-	(25.5)	(25.5)
Profit for the period	78.5	15.5	65.4	20.3	(43.4)	136.3

2.      Business segments (continued)

Six months ended 30 June 2011

	General Merchanting £m	Specialist Merchanting £m	Consumer £m	Plumbing &Heating £m	Unallocated £m	Consolidation £m
Revenue	705.2	284.1	513.2	844.7	-	2,347.2
Result
Segment result before synergies, exceptional items and amortisation	84.5	11.5	18.2	34.6	(5.2)	143.6
Synergies arising from the acquisition of BSS	0.4	0.3	-	5.8	-	6.5
Segment result pre-exceptional items and amortisation	84.9	11.8	18.2	40.4	(5.2)	150.1
Exceptional items	(3.0)	-	-	(0.5)	-	(3.5)
Amortisation of intangible assets	-	-	-	(6.5)	-	(6.5)
Segment result	81.9	11.8	18.2	33.4	(5.2)	140.1
Finance income	-	-	-	-	9.7	9.7
Finance costs	-	-	-	-	(20.6)	(20.6)
Profit before taxation	81.9	11.8	18.2	33.4	(16.1)	129.2
Taxation	-	-	-	-	(27.9)	(27.9)
Profit for the period	81.9	11.8	18.2	33.4	(44.0)	101.3

Year ended 31 December 2011

	General Merchanting £m	Specialist Merchanting £m	Consumer £m	Plumbing &Heating £m	Unallocated £m	Consolidation £m
Revenue	1,443.3	582.2	1,017.8	1,735.8	-	4,779.1
Result
Segment result before synergies and exceptional items	169.4	24.6	46.2	64.3	(9.0)	295.5
Synergies arising from the acquisition of BSS	1.1	1.3	(0.2)	15.5	-	17.7
Segment result pre-exceptional items	170.5	25.9	46.0	79.8	(9.0)	313.2
Exceptional items	(5.9)	(0.6)	-	(3.3)	-	(9.8)
Amortisation of intangible assets	-	-	-	(12.9)	-	(12.9)
Segment result	164.6	25.3	46.0	63.6	(9.0)	290.5
Finance income	-	-	-	-	22.4	22.4
Finance costs	-	-	-	-	(43.3)	(43.3)
Profit before taxation	164.6	25.3	46.0	63.6	(29.9)	269.6
Taxation	-	-	-	-	(57.2)	(57.2)
Profit for the year	164.6	25.3	46.0	63.6	(87.1)	212.4

2.      Business segments (continued)

For the purposes of monitoring segment performance the Group's Chief Executive monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of cash, investments in associates, retirement benefit assets, derivative financial instruments and holding company intra group balances.

Segment	30 June 2012 £m	30 June 2011 £m	31 Dec 2011 £m
General Merchanting	2,124.0	2,208.2	2,096.3
Specialist Merchanting	454.7	366.7	457.9
Consumer	1,695.4	1,540.1	1,520.3
Plumbing & Heating	1,138.3	1,218.9	1,145.2
Unallocated	121.0	211.0	198.7
Eliminations	(1,174.3)	(1,263.0)	(1,227.2)
Total assets	4,359.1	4,281.9	4,191.2

3.      Seasonality

The Group's trading operations are mainly unaffected by seasonal factors. In 2011, the period to 30 June accounted for 49% of the Group's annual turnover (2010: 49%).

4.       Retirement benefit obligations

	Six months ended 30 June 2012 £m	Six months ended 30 June 2011 £m	Year ended 31 Dec 2011 £m
Gross deficit 1 January	(45.7)	(27.9)	(27.9)
Current service cost	(5.1)	(5.0)	(7.1)
Other finance income	5.5	5.7	11.8
Contributions received by the Schemes	14.0	13.4	27.3
Actuarial losses recognised in the statement of comprehensive income	(13.4)	(1.6)	(49.8)
Gross deficit at 30 June / 31 December	(44.7)	(15.4)	(45.7)
Pension surplus	11.5	39.0	19.3
Pension deficit	(56.2)	(54.4)	(65.0)
Gross deficit at 30 June / 31 December	(44.7)	(15.4)	(45.7)
Deferred tax	10.7	4.0	11.4
Net deficit at 30 June / 31 December	(34.0)	(11.4)	(34.3)

5.         Finance costs

	Six months ended 30 June 2012 £m	Six months ended 30 June 2011 £m	Year ended 31 Dec 2011 £m
Interest receivable	0.1	2.0	4.4
Amortisation of cancellation receipt for swap accounted for as fair value hedge	0.5	0.5	1.1
Net gain on re-measurement or settlement of derivatives at fair value	0.6	1.5	5.1
Other finance income - pension scheme	5.5	5.7	11.8
Finance income	6.7	9.7	22.4
Interest on bank loans and overdrafts	(12.3)	(11.9)	(23.5)
Amortisation of issue costs of bank loans	(0.6)	(1.6)	(3.1)
Other interest	(0.6)	(0.1)	(1.2)
Interest on obligations under finance leases	(0.6)	(0.6)	(1.2)
Amortisation of cancellation payment for swaps accounted for as cash flow hedges	(2.0)	(2.1)	(4.2)
Unwinding of discounts in provisions	(2.5)	(3.1)	(5.7)
Net loss on re-measurement or settlement of derivatives at fair value	(1.7)	-	-
Finance costs before exceptional items	(20.3)	(19.4)	(38.9)
Exceptional items (note 6)	(3.4)	(1.2)	(4.4)
Net finance costs after exceptional items	(17.0)	(10.9)	(20.9)

6.      Pre-tax exceptional items

Pre-tax exceptional items comprise:

·      £35.3m of exceptional fair value gains were recognised in investment income when the requirements of IFRS 3 (2008) Business Combinations were applied to the investments held in Toolstation. This acquisition has resulted in the existing 30% associate interest being re-measured to its fair value at the acquisition date;

·      £6.0m release through operating profit of onerous lease provisions that are no longer required because the properties to which they related have been sublet;

·      £5.1m of exceptional operating costs associated with the BSS integration;

·      £3.4m of exceptional financing charges arising from unwinding the discount on the Toolstation contingent consideration.

7.      Tax

	Six months ended 30 June 2012 £m	Six months ended 30 June 2011 £m	Year ended 31 Dec 2011 £m
Current tax
UK corporation tax
- current year	(32.8)	(36.5)	(69.2)
- prior year	-	-	2.5
Total current tax charge	(32.8)	(36.5)	(66.7)
Deferred tax
- current year	7.3	8.6	9.8
- prior year	-	-	(0.3)
Total deferred tax	7.3	8.6	9.5
Total tax charge	(25.5)	(27.9)	(57.2)

Tax for the interim period is charged on profits before tax, based on the best estimate of the corporate tax rate for the full financial year adjusted for exceptional items. The tax charge for 2012 includes an exceptional credit of £6.3m arising from a reduction in the rate of UK corporation tax from 25% to 24% on 6 April 2012. A further reduction in the rate of corporation tax received Royal Assent on 17 July 2012, reducing the UK corporation tax rate to 23%. This reduction has not been reflected in these financial statements.

8.      Earnings per share

a) Basic and diluted earnings per share
	Six months ended 30 June 2012 £m	Six months ended 30 June 2011 £m	Year ended 31 Dec 2011 £m
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity share holders of the Parent	136.3	101.3	212.4
Number of shares	No.	No.	No.
Weighted average number of shares for the purposes of basic earnings per share	237,925,458	234,826,481	235,151,104
Dilutive effect of share options on potential shares	8,455,965	8,264,196	8,057,058
Weighted average number of shares for the purposes of diluted earnings per share	246,381,423	243,090,677	243,208,162

8.      Earnings per share (continued)

b) Adjusted earnings per share Adjusted earnings per share are calculated by excluding the effect of the exceptional items in 2012 and 2011 from earnings.
	Six months ended 30 June 2012 £m	Six months ended 30 June 2011 £m	Year ended 31 Dec 2011 £m
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity share holders of the Parent	136.3	101.3	212.4
Exceptional items	(32.8)	4.7	14.2
Amortisation of intangible assets	8.7	6.5	12.9
Tax on amortisation	(2.2)	(1.5)	(3.2)
Tax on exceptional items	0.2	0.3	(4.7)
Effect of reduction in corporation tax rate on deferred tax	(6.3)	(6.3)	(12.6)
Earnings for adjusted earnings per share	103.9	105.0	219.0
Adjusted earnings per share	43.7p	44.7p	93.1p
Adjusted diluted earnings per share	42.2p	43.2p	90.0p

9.      Dividends

Amounts were recognised in the financial statements as distributions to equity shareholders in the following periods:

	Six months ended 30 June 2012 £m	Six months ended 30 June 2011 £m	Year ended 31 Dec 2011 £m
Final dividend for the year ended 31 December 2011 of 13.5 pence (2010: 10 pence) per share	32.1	23.5	23.5
Interim dividend for the year ended 31 December 2011 of  6.5 pence (2010: 5 pence) per share	-	-	15.3

The proposed interim dividend of 8p per share in respect of the year ending 31 December 2012 was approved by the Board on 25 July 2012 and has not been included as a liability as at 30 June 2012.  It will be paid on 12 November 2012 to shareholders on the register at close of business on 12 October 2012.  The shares will be quoted ex-dividend on 10 October 2012.

10.     Borrowings

At the period end, the Group had the following borrowing facilities available:

	30 June 2012 £m	30 June 2011 £m	31 Dec 2011 £m
Drawn facilities
US guaranteed senior notes	272.7	339.5	279.3
5 year term loan	293.8	352.5	323.2
5 year revolving credit facility	-	15.0	-
Bank overdrafts	-	12.5	-
	566.5	719.5	602.5
Undrawn facilities
5 year revolving credit facility	475.0	460.0	475.0
Bank overdrafts	40.0	37.9	40.0
	515.0	497.9	515.0

The Group has a £550m committed forward start facility in place that can be drawn down from 4 April 2013, the date the Group's existing syndicated facility expires.  However, accounting regulations require that the Group's syndicated facility borrowings at 30 June 2012 are shown as current liabilities in the balance sheet.  This is a technical accounting disclosure, which does not reflect the substance of the Group's underlying borrowing position.

11.     Share capital

	Allotted
Ordinary shares of 10p	No.	£m
At 1 January 2012	243,816,533	24.4
Allotted under share option schemes	405,197	-
At 30 June 2012	244,221,730	24.4

12.     Net debt reconciliation

	Six months ended 30 June 2012	Six months ended 30 June 2011	Year ended 31 Dec 2011
	£m	£m	£m
Net debt at 1 January	(583.2)	(773.6)	(773.6)
(Decrease) / increase  in cash and cash equivalents	(18.0)	17.6	27.7
Cash flows from debt	32.9	51.2	153.8
Decrease  in fair value of derivatives	5.5	9.4	1.5
Exchange gain / (loss) on private placement	0.7	1.8	(0.5)
Finance charges netted off bank debt	(0.6)	(1.5)	(3.1)
Fair value of BSS loan notes repaid	-	-	12.4
Amortisation swap cancellation receipt	0.5	0.5	1.1
Discount unwind on pension SPV	(1.3)	(1.3)	(2.5)
Net debt at 30 June / 31 December	(563.5)	(695.9)	(583.2)

13.     Non-statutory information

a) Gearing                                                         

	At 30 June 2012 £m	At 30 June 2011 £m	At 31 Dec 2011 £m
Net Debt under IFRS	(563.5)	(695.9)	(583.2)
IAS 17 finance leases	19.5	21.1	20.3
Unamortised swap cancellation receipt	3.5	4.6	4.0
Pension SPV	35.6	-	37.2
Fair value adjustment to debt	30.4	38.6	36.6
Finance charges netted off bank debt	(0.9)	(3.1)	(1.5)
Net debt under covenant calculations	(475.4)	(634.7)	(486.6)
Total equity	2,214.0	2,035.8	2,107.8
Gearing	21.5%	31.2%	23.1%

b) Covenant calculations (rolling 12 months)
	Six months ended 30 June 2012 £m		Six months ended 30 June  2011 £m		Year ended 31 Dec  2011 £m
Profit before taxation	302.2		218.8		269.6
Net finance costs	27.0		25.3		20.9
Depreciation, amortisation and impairments	81.6		67.2		76.7
EBITDA under IFRS	410.8		311.3		367.2
Exceptional  items	(29.9)		17.9		9.8
Toolstation 2011 and BSS 2010 pre-acquisition EBITDA	3.2		41.0		-
Reversal of IFRS effect	(2.7)		(2.6)		(2.7)
Adjusted EBITDA under covenant calculations	381.4		367.6		374.3
Net debt under covenant calculations (note 13a)	475.4		634.7		486.6
Adjusted net debt to EBITDA	1.25x		1.73x		1.30x
Net interest payable under covenant calculations (rolling 12 months)	23.0		17.5		20.3
Interest cover	13.6x		15.3x		15.4x

13.     Non-statutory information (continued)

c) Adjusted free cash flow

	Six months ended 30 June 2012 £m	Six months ended 30 June  2011 £m	Year ended 31 Dec  2011 £m
Operating profit before amortisation and exceptional items	151.3	150.1	313.2
Depreciation	33.9	31.3	63.9
Other non cash movements	7.0	8.1	14.5
Gain on disposal of property plant and equipment	(1.1)	(13.0)	(17.6)
Movement on working capital	(27.8)	(11.5)	9.0
Net interest paid	(12.4)	(12.9)	(23.5)
Income tax (paid) / received	(30.3)	8.2	(26.3)
Replacement capital expenditure	(28.7)	(26.6)	(54.7)
Proceeds of disposal	7.0	2.3	15.0
Adjusted free cash flow	98.9	136.0	293.5

d) Adjusted EBITA before property profits

	Six months ended 30 June 2012 £m	Six months ended 30 June  2011 £m
Adjusted EBITA	151.3	150.1
Property profits	(0.5)	(12.6)
Adjusted EBITA before property profits	150.8	137.5

e) Adjusted profit before tax before property profits

	Six months ended 30 June 2012 £m	Six months ended 30 June  2011 £m
Adjusted profit before taxation	137.7	140.4
Property profits	(0.5)	(12.6)
Adjusted profit before taxation before property profits	137.2	127.8

13.     Non-statutory information (continued)

f) Adjusted EPS before property profits

	Six months ended 30 June 2012 £m	Six months ended 30 June  2011 £m
Adjusted profit after taxation	103.9	105.0
Property profits	(0.5)	(12.6)
Tax effect of property profits	-	-
Adjusted profit after taxation before property profits	103.4	92.4
Weighted average number of shares (note 8)	237,925,458	234,826,481
Adjusted EPS before property profits	43.5p	39.3p

14.     Toolstation Limited

On the 3 January 2012 the Group acquired the remaining 70% of the issued share capital of Toolstation Limited. The Group had previously acquired 30% in April 2008, which included an option to buy the remaining 70%.  The acquisition was accounted for using the purchase method of accounting.  Provisional fair values ascribed to identifiable assets as at 3 January 2012 are shown in the table below.

			Fair value acquired
Net assets acquired:			£m
Property, plant and equipment			7.7
Identifiable intangible assets			53.3
Inventories			21.4
Trade and other receivables			4.3
Cash at bank			0.8
Trade and other payables			(25.8)
Deferred tax liabilities			(6.4)
Loan repayable to Travis Perkins plc			(39.6)
			15.7
Goodwill - addition during the period			102.9
			118.6
Satisfied by:			£m
Cash paid in prior periods			17.3
Cash paid in current period			24.2
Contingent consideration			65.0
			106.5
Revaluation of pre existing equity holding			33.1
Discount on contingent consideration			(13.8)
Losses previously recognised			(7.2)
			118.6

.

14.     Toolstation Limited (continued)

The contingent consideration payable in 2014 is dependant upon future performance and expansion of the business over the period to December 2013.  After taking into account the requirements of the purchase and sale agreement the cash payment in 2014 is currently expected to be £65.0m.

International Financial Reporting Standard ("IFRS") 3 (2008) requires the consideration transferred in a business combination to be measured at fair value and therefore the future cash consideration has been discounted by £13.8m.  The discount arises from a technical accounting matter and does not relate to the Group's underlying trading. Therefore, as the discount unwinds over the next two years the income statement will reflect an exceptional financing charge of approximately £6.9m per annum.

If the actual consideration paid in 2014 differs from our current estimate of £65m, then IFRS 3 (2008) will require the difference to pass through the income statement.  Given any such difference will not relate to trading, we anticipate it will be shown as an exceptional item.

Total revenue and operating profit for Toolstation for the period from 3 January 2012 to 30 June 2012 were £63.4m and £2.9m respectively.

15.     Related party transactions

The Group has a related party relationship with its subsidiaries and with its directors.  Transactions between group companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.  There have been no material related party transactions with directors. The Group advanced a further net £1.8m in the form of loans to its associate companies The Mosaic Tile Company Limited and Rinus Roofing Limited. Operating transactions with The Mosaic Tile Company Limited and Rinus Roofing Limited were not significant during the period.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a) The condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b) The Interim Management Report includes a fair review of the information required by DTR 4.2 .7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) The Interim Management Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).

By order of the Board

G. I. Cooper                             P. N. Hampden Smith

Chief Executive                          Finance Director

25 July 2012                              25 July 2012

INDEPENDENT REVIEW REPORT TO TRAVIS PERKINS PLC

We have been engaged by the Company to review the condensed set of condensed consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 15. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

25 July 2012

 

END

 

 

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