Publication of the Annual Report

RNS Number : 0422F

Travis Perkins PLC

18 April 2011

ANNUAL REPORT 2010

18^th April 2011

Travis Perkins plc announces that its Annual Report for the year ended 31^st December 2010, and the Notice of Annual General Meeting, is now available on the company's website - www.travisperkinsplc.com.

Printed copies of these documents will be posted to shareholders on or around 18^th April 2011 and in accordance with rule 9.6.1 of the Listing Rules they will shortly be submitted to the National Storage Mechanism.

In accordance with rule 6.3.5 of the Disclosure and Transparency Rules, we set out below the following extracts from the Annual Report in unedited full text. Accordingly, page references in the text below refer to page numbers in the Annual Report.

· Financial Highlights

· Chairman's Statement

· Chief Executive's Review of the Year

· Chief Operating Officer's Review of the Year

· Finance Director's Review of the Year

· Statement of Director's Responsibilities

· Financial Statements

· Selected Notes to the Financial Statements

Directors' responsibility statement.

We confirm to the best of our knowledge:

o the financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group taken as a whole; and

o the reports of the directors include a fair review of the development and performance of the business and the position of the Group taken as a whole, together with a description of the principal risks and uncertainties they face.

On behalf of the Board:

Geoff Cooper - Chief Executive
Paul Hamden Smith - Finance Director

The Annual General Meeting of the company will take place at 11.45 a.m. on Thursday, 26^th May 2011 at Northampton Rugby Football Club, Franklin's Gardens, Weedon Road, Northampton NN5 5BG.

Enquiries:

Geoff Cooper

Chief Executive

Travis Perkins plc

Tel No: +44 (0)1604 683030

Paul Hampden Smith

Finance Director

Travis Perkins plc

Tel No: +44 (0)1604 683112

David Bick / Mark Longson

Square1 Consulting Ltd

Tel No: +44 (0)207 929 5599

FINANCIAL HIGHLIGHTS

For the year ended 31 December 2010

FINANCIAL HIGHLIGHTS
	· Group revenue up 8% at £3,153m, up 5% on a like-for-like basis
	· Adjusted profit before tax up 20% to £217m
	· Adjusted EPS up 5% before consolidating BSS, up 3% to 77.2p on a reported basis
	· Adjusted group operating margin before BSS impact increased by 0.1% to 7.8%
	· Net debt reduced by £205m before the effect of the BSS acquisition and the one-off pension contribution
	· Year end net debt was £774m. Adjusted net debt to EBITDA was 1.92x (note 38)
	· Travis Perkins pension fund into surplus of £32m
	· Final dividend of 10p per share making a total dividend of 15p per share
	· BSS acquisition completed on 14 December 2010 for £799m enterprise value
OPERATING HIGHLIGHTS
	· All 11 group businesses performed better than the market with outperformance of around 4% in merchanting and around 6% in retail
	· Focus on operating and financial performance maintained against background of completion of the major acquisition project of BSS
	· Strong like-for-like performance in merchanting with increase of 7.3%
	· Retail like-for-like sales increase of 0.2%
		2010		2009
		£m	%	£m

Revenue		3,152.8	7.6	2,930.9

Adjusted*:
Operating profit (note 5a)		239.0	6.4	224.6
Profit before taxation (note 5b)		216.7	20.4	180.0
Profit after taxation (note 5b)		156.9	17.2	133.9
Basic earnings per ordinary share (pence) (note 12)		77.2	2.7	75.2
Statutory:
Operating profit		219.8	(14.6)	257.3
Profit before taxation		196.8	(7.5)	212.7
Profit after taxation		141.3	(10.2)	157.4
Basic earnings per ordinary share (pence)		69.6	(21.3)	88.4

Total dividend declared per ordinary share (pence) (note 12)		15.0p	-	-

* Throughout these financial statements 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 2010 and 2009 are given in notes, 5, 8, 10 and 11.

CHAIRMAN'S STATEMENT

For the year ended 31 December 2010

I am pleased to present my first statement to shareholders as Chairman of Travis Perkins and to report on a year of substantial progress across the Group, in spite of the deepest recession that most of us can remember.

Increased revenues, together with a continuing focus on cash generation, cost reduction and margin protection, have produced an excellent set of results in the current economic circumstances.

A further highlight was the acquisition of The BSS Group plc ("BSS") at the end of 2010. As a result, the Group now has a better balanced set of businesses focussed on three segments; merchanting, retail and BSS. All these businesses were characterised by increasing market share, focussed strategies and self-help initiatives.

Results

The Group's reported revenue in 2010 rose by almost 8% to over £3.1bn and our adjusted pre-tax profits climbed by 20% to almost £217m. Adjusted earnings per share before the consolidation of the last two weeks of trading at BSS (through the traditional Christmas shutdown) increased by 5% to 78.8 pence, and on a reported adjusted basis, rose 3% to 77.2p per share. Importantly, every single business in the Group, from Travis Perkins merchants and Wickes DIY through to each individual specialist business, increased market share in its segment and grew sales and profitability.

Once again, underlying net debt fell, this time by £205m, to £262m, before taking account of the acquisition of BSS.

Gross capital expenditure for the year was £65m. In addition, £624m, which included an equity element of £329m, was spent on acquisitions.

I am also pleased to report that as a result of actions taken, including making a £35m one-off special contribution, and improved investment performance, the Travis Perkins final salary pension scheme is now into an accounting surplus of £32m.

Dividend

In view of the Group's improved prospects and strengthened financial position, I am pleased to recommend to shareholders, on behalf of the Board, a final dividend of 10p per share. Together with the interim dividend of 5.0p per share paid last November, the total dividend for 2010 will amount to 15p per share, which will absorb £35m of cash. Our objective is to grow dividends ahead of earnings so as to reduce dividend cover to between 2.5 times and 3.5 times over the medium term.

Acquisition of BSS

The acquisition of BSS was the significant event of 2010 for the Group, for a total consideration of £624m, a combination of cash and equity. BSS is a well established and proven quality business with excellent people. The prospects for the business are exciting and we look forward to working together to achieve the synergistic benefits from the combination of our two businesses, and to invest in further growth.

On behalf of all employees of Travis Perkins, I am delighted to welcome the BSS team into our Group. We now have the leading plumbing business in the UK to add to the leading positions represented by other group businesses.

Employees

We continue to enjoy the support and loyalty of very committed colleagues. We are investing to develop our people and we go to considerable lengths to ensure that we provide the best incentives and career progression possible. On behalf of the Board, I would like to thank our colleagues throughout the Group for their contributions to the success of the business.

Outlook

Conditions for the next 12 months remain difficult. There is considerable gloom in the wider economy, but we do not subscribe to the double-dip theory. The merchanting market fell by over 30% from its peak in 2008 and although activity has picked up a little, from a longer term perspective, activity levels are currently around 20% below their peak. Although we will probably see some turbulence in short term trends, we expect activity levels to continue their gradual recovery. In contrast, we expect the retail market to continue to be soft.

We will continue to pursue our organic growth strategy, which is delivering increasing market share and sales performance. This process of continual improvement is supported by many new initiatives that we will implement during the course of the year.

Our key objectives to drive financial performance in 2011 are to continue the Group's strategy of organic growth and to integrate BSS so we get the best out of the acquisition. We have proved we can generate superior returns from businesses in our sector; we will continue to drive all our businesses for cash generation.

We look forward to another year of good progress.

Robert Walker

Chairman

22 February 2011

CHIEF EXECUTIVE'S REVIEW OF THE YEAR

For the year ended 31 December 2010

INTRODUCTION

The Group made excellent progress in 2010 - a year in which our organic development strategy, against a background of depressed levels of construction activity, produced a strong financial performance, with further market share gains and impressive increases in profits. We also strengthened considerably the Group's strategic position and prospects in the UK through the completion of the BSS transaction at the end of the year.

The prevailing culture within the Travis Perkins Group is to allow managers to manage, to anticipate markets and trends with our customers and to swiftly find sensible and workable solutions to our customers' requirements. Our highly efficient central service functions are there to underpin and support the activity of our branch and operational managers.

This approach has served us well during the past 12 months. It is our ethos. We are a quality business consisting of quality people.

We are also a progressive business. We get on and do things. With an unshakeable focus on delivering excellent products and service, we were able to achieve all the main ambitions we set ourselves for 2010, in spite of a challenging economic climate, particularly in the building and refurbishment industry.

The Group outperformed its markets by 4% to 6% in 2010, on a like-for-like basis, in both merchanting and retail. We had good growth in sales, taking market share and, as a result, grew our profit before tax and exceptional items and amortisation by 20%. We have the systems and tools in place to continue our organic growth and we enter 2011 with confidence.

We pursued our acquisition target, BSS, for most of the year, finally succeeding in completing the acquisition in December. We now look forward to working with our new colleagues to grasp the excellent opportunities presented by this transaction.

PERFORMANCE

All 11 businesses within the Group performed relatively better through the recession than their sector benchmarks. This was largely due to the intensive and wide-ranging groundwork we began in 2008 to ensure we were better equipped than our rivals to cope with changes in the market and the economy.

Throughout this annual report, consistent with our approach last year, the term "adjusted" has been used to signify that the effects of exceptional items and amortisation of intangible assets have been excluded from the disclosures being made. The exceptional operating charge of £19.0m in 2010 relates to costs associated with the Group's acquisition of BSS. In 2009 the exceptional income related to a £32.7m pension scheme curtailment gain which arose when future increases in pension scheme members' pensionable salaries were capped.

For 2010, the Group reported revenue up £222m at £3,153m (2009: £2,931m). Whilst the market overall was broadly flat in value, our revenues increased mainly through the self-help initiatives incorporated within our organic strategy. This revenue increase drove adjusted operating profit up 6% to £239m (2009: £225m), adjusted profit before tax up 20% to almost £217m (2009: £180m), and adjusted earnings per share up 3% to 77.2 pence (2009: 75.2 pence). The revenue increase of 7.6% comprised an increase of 5.0% in like-for-like ("LFL") sales, with network expansion accounting for growth of 2.6%.

Excluding BSS, where we consolidate the last two weeks trading over the Christmas shutdown, adjusted group operating margin rose by 0.1% to 7.8% (2009: 7.7%). This reflects our strategy of investing in improvements to our customer propositions. Whilst adjusted operating margin in the retail division improved by 0.1% to 5.9% (2009: 5.8%), merchanting division adjusted operating margin remained at 8.8%. Including the effect of the BSS acquisition, adjusted operating margin (including BSS' post acquisition loss of £2.6m) fell by 0.1% to 7.6% (note 5c).

After including exceptional items and amortisation of intangible assets in both years, the Group recorded a decrease of 7% in PBT to £196.8m (2009; £212.7m) and a decrease of 21% in earnings per share to 69.6 pence (2009; 88.4 pence).

The Group generated free cash flow of £277.8m in 2010 (2009: £294.4m), a 5.6% decrease year-on-year. Overall, including the cash outflow relating to the acquisition of The BSS Group plc of £476.9m, net debt increased to £773.6m (2009: £467.2m). For covenant purposes net debt was £701.4m (2009; £413.1m), giving a net debt / EBITDA ratio of 1.92 times (2009: 1.47 times) and interest cover of 18.9 times (2009: 10.7 times).

Including the effect of our £624m acquisition of The BSS Group plc, shareholders' funds increased by £491m.

The Group has started the year well with LFL sales in January up 22% in merchanting, 8% up in BSS and 12% in Retail on a delivered basis (Wickes core up 12%, kitchen and bathroom ("K&B") up 15%), reflecting the weak comparatives from the snow affected January 2010. The first 3 weeks of February have also traded well with a 10% increase in LFL in merchanting, 5% in BSS, and a 2% increase in Retail on an delivered basis (Wickes core up 3%, K&B down 2%).

In January, Wickes' K&B orders were down 3% and in February they were down 36%. This reflects a combination of pre-VAT increase advanced ordering in late 2010, rather than early 2011, and recent competitor discounting. In this weak K&B market our K&B gross margins are ahead of 2009.

These strong performance ratios are directly related to our managers' expertise and experience. Our direction is heavily influenced by our operating managers who tell us what is really going on in the market. No one is better placed to know what our customers are doing and what they need to carry out their work than our branch and operational managers. Gathering intelligence from customers is the only way we can really know what is happening at ground level. Thanks to our regular customer surveys and the experience and knowledge of our managers, our antennae are highly developed.

As a result, the Group was able to identify key turns in the course of the economic cycle, and as a consequence:

· Take quick action to reduce costs as construction activity fell at the outset of the recession;

· Begin a programme of investing in growing our business as markets began to stabilise;

· Identify swiftly the opportunity and benefits of acquiring BSS.

We combine systems and processes, which track a range of lead indicators, with our managers' instinct and close knowledge of customers' views. As a result of those relationships, we know what drives our market and we know how to adapt and respond to changing market conditions.

MARKETS AND OUR RESPONSE

We predicted, in merchanting, a gradual recovery in 2010 from the sharp contraction of activity, caused by the recession, which started towards the end of 2008. In contrast, we expected a contraction in retail markets in 2010 following the fading of the artificial support consumers received from a fall in housing costs in 2009. We were broadly correct, with the aggregate value of these two segments of the market being broadly flat despite continued relatively high product cost and price inflation.

Our tracking of lead indicators told us that construction activity levels were improving at the end of 2009 and the beginning of 2010. When the UK went into the recession at the end of 2008, builders were doing more and more 'second fix' internal work, but less and less heavy-duty foundation, and block and brick building work. In effect, the builders were completing projects that were already underway. This changed towards the end of 2009 when a slow recovery in mortgage activity encouraged more housing related building works, including the opening up of many new housing sites. Whilst this directly boosted the merchanting market, the retail market had a tough time as inflation bit into consumers' purchasing power.

We responded to this turn in the market by re-starting many of the improvement programmes that drive our organic growth strategy. The main programmes boosted at the beginning of 2010 cover product availability, ranging, delivery services, multi channel trading and account management. Behind these programmes significant support is provided by our central technology, supply chain, procurement and marketing functions.

Successful deployment of these programmes meant we were able to outperform in both merchanting and retailing sectors by anticipating what was likely to confront us and be sufficiently flexible in our working operations to manage fluctuations in the market.

So what is behind this quality of flexibility that we have? It is because of the culture of our managers and the way we organise ourselves. We try to give our managing directors, boards and branch managers as much autonomy as possible. In effect, we leave our businesses and branches with the freedom to trade in the best way they deem appropriate. They decide on the hiring of staff, on remuneration, on the products they stock, and the pricing of products. Our key colleagues in branches have day-to-day working relationships with all their customers, from householders and sole traders to major construction businesses, and they can determine how to manage those customers and on what terms. Those decisions are not set in stone from a head office policy-maker. Each individual business board and branch manager has the freedom to work within a sensible business plan, aimed at delivering performance on a broad range of financial and service metrics.

The central functions are made to report to the business, rather than the other way round. If the managing director of a business has identified a significant issue or a potential problem, he or she has the ability to contact a senior director at head office and demand an immediate response.

It is our culture of "getting on and doing things" that makes all our businesses flexible and quick to respond. Every day we see many examples of our people getting on with fixing things, solving problems on behalf of our customers and suppliers and improving our businesses.

MERCHANTING DIVISION

The four businesses that operate under the Travis Perkins brand all performed strongly during 2010. Joe Mescall, Chairman of the general merchanting division, a superb merchant who has been with the Group since 1974, and his four managing directors and their boards, have all had an outstanding year.

Merchanting division sales increased by 8.0%, with sales from new branch openings contributing 0.7%, and LFL sales improving 7.3%. The LFL increase comprised 3.6% of price inflation and 3.7% increase in volumes. We estimate that both our general and specialist merchanting operations recorded a performance of around 4% ahead of the market, with LFL sales in general merchanting increasing by 6.7% and specialist merchanting increasing by 8.5%.

These performances were achieved by improvements in our overall service to builders, including better product availability to ensure that constructors and builders had sufficient stock to complete entire projects. A great deal of effort has been concentrated on being able to supply products in the right quantity and at the right price. Our regular customer research indicates that over the year we have consolidated our reputation for being the merchant who can supply what customers need, when they need it. Because of our growing international sourcing expertise, we can increasingly supply both unique and routine products at more competitive prices than our rivals. This aspect of our work relies on the vital support of our buying and supply chain teams, working in tandem.

As activity levels began to increase, the Travis Perkins branches were there to support customers and we saw strong sales growth and an increase in operating profits. In general terms, when you ask a builder why they go to a particular supplier, they give a dozen or so reasons for their choice. Travis Perkins likes to be the number one choice in seven or eight of those decision-making criteria. And we make sure we are.

Arthur Davidson, another great merchant with many years experience, chairs our specialist division. He and his team produced a superb performance from their four businesses whilst strengthening their strategic position with significant development activity

Keyline

Our heavy building materials and civils and drainage specialist experienced the toughest year of all 11 of our businesses as a result of the obvious squeeze in the new construction market. Our customers needed to repair a house, but they didn't have to build a new property. But in line with our Group ethos, Keyline responded imaginatively and instantly with a boost to its customer service under the banner "Best In Town". Even though the market was undeniably challenging, Keyline, under the direction of Managing Director Andrew Harrison, led the market by supplying the best range of products to satisfy demand from customers. This initiative enabled Keyline to convince customers that they were first choice for civils products, with Keyline recording like-for-like sales growth ahead of the general merchanting division, and a healthy increase in profits.

City Plumbing

Our acquisition of BSS after a protracted nine-month process overshadowed the activity of City Plumbing, since the two businesses compete in the same market. However, we were delighted by the team's ability to maintain their enthusiasm and focus throughout. The result is that Managing Director John Frost and his team completed an impressive year, improving their sales, outgrowing their market and increasing profits. In fact, CPS recorded the highest like-for-like sales growth of any of our mature merchant businesses. That was a considerable achievement under the circumstances. The team put together a progressive and exciting initiative to focus on what plumbers really require under the banner "What Good Looks Like". This ethos swept through the whole operation.

Benchmarx

Our specialist kitchen and joinery business which sells to the trade, under the guidance of Managing Director Chris Larkin, is only four years old. Having completed the first two phases in growing the business, namely its launch and then its refinement, Chris took over in the third phase - to drive profits. This involved looking at fresh opportunities to attract new customers to Benchmarx. Chris did an excellent job, performing beyond our expectations, motivating his team and strengthening the engagement of management. Chris also created and led a new initiative to install Benchmarx 'implants' in other group trading brands offering good cross-selling opportunities. This has been successful, and will be pursued in 2011. Sales growth has been very strong, outstripping the market leader by some considerable distance. Our budgets suggested that the business would make a small loss in its third year; Benchmarx has reached profitability ahead of schedule.

CCF

Our specialist distributor of building materials for interiors contractors had another excellent year, led by Kieran Griffin, its recently appointed managing director. Kieran spearheaded efforts to further widen CCF's product range under its 'one stop shop' concept. This, together with a range of other operational initiatives, enabled CCF to significantly outperform the market in like-for-like sales growth and increase operating profits.

RETAIL

All retail markets were tough in 2010, with non-food, particularly our own segment of DIY, badly affected by falling consumer confidence. Against this backdrop our retail division outperformed its market by around 6%, with further improvements to our customer proposition, particularly in our multi-channel operations, where our superior technologies and fulfilment operations have helped us make significant gains in revenues. We are pleased that, with increasing use of retail channels by tradesmen, our market share gains have been greatest in that segment of the market.

Retail division total sales were up by 2.3% to £1,003m (2009: £981m), with sales from new branch openings contributing 2.1%. A 3.3% sales increase arising from price inflation was offset by a 3.1% volume decrease resulting in a LFL sales increase of 0.2%. Within the retail division's overall LFL performance, LFL sales for the full year of Wickes' core products were down by 2.0%, and on the same basis K&B sales were ahead by 9.5%.

Wickes

We continued to develop the Wickes nationwide comprehensive television advertising campaign. "Wickes: It's Got Our Name On It" was introduced at the end of 2008 and has continued to establish huge brand recognition and awareness. Managing Director, Jeremy Bird, and his team, have seen a considerable uplift in Wickes' sales and market share as a result. We were initially reluctant to embark on this campaign since Wickes is not represented in every town and city in the UK. However, the advertisements were impactful from the start. The early concentration was on kitchens and bathrooms, before moving to a broader range of general DIY products.

The advertising campaign was accompanied by improvements to ranges, pricing and delivery options, and complemented by an increasingly powerful multi-channel approach. As a result, Wickes achieved like-for-like sales growth and improved operating profits in a falling market - a remarkable performance, and a tribute to the attractiveness of Wickes as a no-nonsense home improvement retailer.

Tile Giant

Mo Iqbal started the business and continues to drive it forward with great passion and effort. Travis Perkins acquired the company in late 2007 when it had 29 stores, mainly in the Midlands. There are now 101, and Tile Giant is a serious challenger in the market. The main focus has been to develop an outstanding product range. Initially, Tile Giant concentrated on ceramics, but following the acquisition of two other businesses that specialised in other segments of the market, its product offering has been strengthened significantly. The result is Tile Giant offers its growing number of customers a wide range of excellent products at great prices, all under one roof. This has driven a positive and market-leading like-for-like sales performance in 2010,

ToolStation

It was another outstanding year for ToolStation, driven by the entrepreneur Mark Goddard Watts. When the Group acquired a 30% stake in the business in April 2008, ToolStation had 12 stores, but as a result of the concept being rolled out so effectively, there are now 84. Based on its world-class in-house developed technology, it continues to be a low-cost business that delivers outstanding product availability and value to its customers.

INVESTORS

Throughout the course of the recession, the Group has been strongly backed by investors. The decision to bring stability to our balance sheet with the rights issue in May 2009 has been of great benefit to the Group. Investors taking up their rights will have seen an excellent return for their support to the Company. We meet our investors at least twice a year and we continue to benefit from their support.

Our banks and US note holders continue to be similarly very supportive of the Group. When there was a great deal of uncertainty in the economy and in the construction industry in particular, we informed investors and bankers what we thought would happen and what we could do to counter the conditions. We performed ahead of our targets and retained confidence in our ability to run our businesses robustly and effectively.

ACQUISITION OF BSS

We approached the BSS opportunitywith great confidence because we believed BSS was strategically strong and financially very attractive. Although we had a considerable amount of plumbing business through our various brands, we were in the second tier of national companies operating in the market. By acquiring BSS and combining our activities, the Group has been promoted to a leading position in the market, making us a powerful force in serving customers and helping suppliers meet their own strategies.

The Group's published target for synergies arising from the BSS acquisition is £25m, which comprises £19m in respect of goods for resale and £6m of overhead savings. We remain confident of achieving these targets.

The integration programme has commenced, but it is too early to provide any further meaningful insight about the synergies available to the Group. However, it is clear that achieving the target will require a substantial effort from teams across the business and in particular the allocation of considerable resource to, and investment in, supply chain and IT. We aim to provide an update at the interim stage this year on our progress towards achieving these synergies.

MANAGEMENT

Because of our scale and our focus on supplying what our customers want, we have consistently achieved the highest return on sales amongst our peers. The Group's pre-recession operating margin was typically more than half as much again when compared to our national competitors. In the more recent tougher economic climate, whilst our operating margin has come down by about a quarter, our peers have suffered proportionately larger falls.

We put a great deal of this difference down to the attitude of our managers. As I discussed earlier, they are highly skilled at anticipating problems and finding sensible and swift solutions. They are on top of their business, so that they respond to tough times by closely managing gross margin and reducing costs. The disaggregated culture of decision making and the prevailing ethos of running our business has taken many years to establish.

Our positive management environment makes for a more rewarding place to work. Following the actions we took to slim down our top management resources at the start of the recession, we have not seen many departures from our director group of 202 people since then.

Every single branch in the Group is subject to a detailed review of its performance, analysing sales contributions from all of them. Branch managers are highly motivated individuals who are keen to perform at their optimum level. We reward our staff well and they are incentivised through effective bonus schemes,

TRAVIS PERKINS IN THE COMMUNITY

Characteristic of how the Group operates, driven from the ground upwards, we continue to move forward our '1000 projects' community programme.

Every branch is encouraged to establish a community project, inspired by a personal contact, completed in their spare time and using our own materials. It's not mandatory, but the response rate has been exceptionally high. The projects create a tremendous sense of team-work and goodwill. The initiative was launched when we reached the milestone of 1,000 branches. With the inclusion of BSS, we now operate from over 1,800 branches, and we are reviewing what the next version of this programme looks like.

I believe the work in our '1,000 projects' initiative contributes greatly to improving engagement of staff. In a vast majority of cases, employees want to be recognised for what they do and many like being part of a winning and harmonious team. The '1,000 projects' works were innovative and helped us to do things that move beyond clichés about business in the community.

The Board of Directors was also encouraged to take part in a community project. Last year, board members spent a day at Battersea Park in London digging and creating a community garden.

The Group's charitable donations were in the region of £200,000 five years ago. Last year we together with our colleagues, customers and suppliers, contributed £1.7m.

Our charity fundraising activity continues to play a key role in engaging our colleagues across the Group, enabling colleagues to take time to support charitable causes that are close to their hearts. Our individual businesses selected their own charitable causes in 2010, after the Group devolved its centrally-managed fundraising model to better fit with our decentralised business model. We now partner with 11 UK based charities.

Each Managing Director leads fundraising for his own business, assisted by a charity committee of employee representatives. Team building and charity fundraising activities are combined powerfully. Strong colleague engagement has led to more than £1.7m being raised in 2010, an uplift of more than double the 2009 total - despite the recession.

Fundraising has been particularly visual in our Travis Perkins brand, which adopted the Breast Cancer Campaign and Children's Hospices UK charities on a two-year partnership and in our Wickes brand which raised nearly £655,000 for its adopted charity Leukaemia and Lymphoma Research. The Travis Perkins businessre-sprayed 12 of its delivery vehicles pink, sourced and sold pink products in its branches, and even changed its name to 'Travis Pinkins' for a national day of fundraising. Keyline's partnership with The Prostate Cancer Charity has been beneficial to the charity in terms of fundraising, and substantially raised public awareness of prostate cancer in the male-dominated building and construction sector. Other beneficiaries of charity partnerships with Travis Perkins' businesses include Clic Sargent, Childline, Whizz-Kidz, and the Warwickshire and Northamptonshire Air Ambulance.

More than £225,000 was donated through the company's Payroll Giving facility in 2010. All of the partner charities benefited from a share of the donations, together with other charitable causes personally chosen by employees. Much of this was raised through a popular and fully licensed Colleague Lottery. Colleagues donate £1 per month from their salary, with up to 50% going to the charity of their business. More than 70% of employees donate through the Lottery, with over £60,000 raised for the partner charities in 2010.

STRATEGY

We are determinedly pursuing our vision of ensuring that anyone in the UK who wants to be supplied with materials to construct, repair or improve the built environment will have a Travis Perkins business as their first choice. Our strategy to achieve this is relatively simple:

· Through a low risk programme of continuous improvement, have the best offer to customers in each market: and

· By applying our business model of disciplined margin management, tight cost control, clear focus on capital returns and a strong alignment of accountability and incentives, have the highest operating margin in each sector.

This approach has produced sector-leading performances in revenue growth and returns, and has enabled us to grow our asset base to achieve powerful positions in each sector of our market.

Over the last four years we have seen three clear turning points in the course of the recession in construction markets - a sharp downturn, a return to stability in activity at low levels, and a gradual but choppy recovery, which still has a long way to go. At each turn we decisively adapted our stance to trading, investment and cash. We took costs out rapidly and decisively at the downturn, put more investment back in as the market stabilised, and, of course, committed to a major acquisition as growth returned last year. These actions mean we are now positioned with a larger footprint in the sector, a leading position in Plumbing and Heating to add to our longstanding leading position in heavyside and timber, and with our branch network intact having seen closures elsewhere.

We are now poised to use our management resources to exploit this position and achieve further growth in returns to shareholders.

As I have noted, the course of the recovery is likely to be choppy and conditions for the next 12 months remain challenging. There is considerable gloom in the wider economy, but we don't subscribe to the double-dip theory. The construction market fell by over 30% in 2008/09 and although activity has picked up a little, on a longer term perspective, activity levels remain low.

The Group's organic growth strategy is based on a combination of self-help initiatives and external expansion. In particular, the Group will extend its direct sourcing operations in the Far East and enhance its supply chain whilst at the same time investing in the IT resource necessary to support those and many other activities.

We will continue to pursue this organic strategy, which is delivering increasing market share and sales performance whilst we monitor very closely both our performance and market conditions to keep ahead of our competitors. We will retain our policy of continuous improvement of our businesses, taking many small steps in a large number of areas of our business. This process of continual improvement is supported by many new initiatives that will be implemented during the course of the year.

Our acquisition of BSS was the stand out event at Travis Perkins last year. Our commercial analysis indicated we would be acquiring a strong company with quality people and that the prospects for the business are excellent and exciting. This has proven to be the case.

We are realistic about market prospects, but are positive about the future because we have the strategy, market position, execution skills and scaleto respond quickly to market changes and to deliver outstanding service to our customers.

Our three main targets for 2011 to create value are to:

· continue the Group's strategy of organic growth. We have more initiatives in gestation to bring to market;

· use our strong cash generation to pay down debt, maintain investment in continuous improvement, selectively continue network expansion and increase dividends;

· integrate BSS and get the best out of the acquisition. We have proved we can generate superior returns from businesses in our sector, and will work hard to apply those skills to the BSS businesses.

We look forward to another year of good progress.

Geoff Cooper

Chief Executive

22 February 2011

CHIEF OPERATING OFFICER'S REVIEW OF THE YEAR

For the year ended 31 December 2010

INTRODUCTION

The Group's strength is based on the commitment, dedication and motivation of an outstanding team of people who work towards a common goal. There are 22,500 of us, and we are excited going into 2011 about the prospects of sharing best practice between our existing businesses and the 5,000 BSS colleagues who have recently joined us.

Last year was tough, but our competitors experienced even harsher times. We continued to grow our 11 merchanting and retail businesses thanks to our proven and detailed systems of operation and we are equipped to respond rapidly to change We gained from an initial increase in house-building in early 2010 and even when that activity levelled off, we were able to cope with changing conditions. As a result, all of our businesses reported excellent results under challenging circumstances.

OUTPERFORMANCE FROM RESULTS-DRIVEN PEOPLE

I have no hesitation in repeating our driving vision - that the Travis Perkins Group is a great place to work and a great place for our customers and suppliers to do business.

We place staff engagement and fulfilment at the very heart of what we set out to achieve. I firmly believe in the mantra that happy, well-motivated people are more productive. Our overarching vision is to create an environment that gets the best from all colleagues, and that is a great and safe place to work.

Our business priorities drive our people initiatives. During 2010, this was clearly illustrated by our pioneering approach to flexible working in the merchanting sector. The economic downturn gave us the impetus to review and improve the flexibility of our branch teams in our merchanting business. We studied our customer flow rates and instigated a process to ensure that we were operating our branches more appropriately. The objective of improving sales, customer service and operating standards by ensuring the right people were at the right place at the right time has been a challenge, but a very worthwhile one. It will enhance our productivity and will contribute to attracting and retaining our people.

Our people initiatives gained real momentum last year and have opened a new world of improved flexibility in employment models and working patterns to reflect our early morning peak hours in the trade sector. Wickes has been operating this system for many years and we will now embrace this flexibility throughout the Group where appropriate.

IMPORTANCE OF AN IMPROVING SAFETY RECORD

Our 'Stay Safe' culture is central to the entire management team's approach. By the very nature of our business, there is considerable movement of heavy machinery and transport on a daily basis in our warehouses, depots and operational sites. In a determined effort to protect our people, we have continued to concentrate on our 'Keep Your Feet on the Ground' programme to avoid accidents. Over 2,500 drivers were trained last year in our on-going effort to meet the spirit, as well as the letter, of the current safety legislation.

BUILDING ENGAGEMENT AMONG OUR COLLEAGUES

In 2010 we employed a bespoke independent research company to carry out our detailed staff survey, which indicated very satisfactory levels of colleague engagement. The results showed that a majority of our people wanted the Group to:

· Reward staff appropriately;

· Communicate effectively;

· Help develop their careers.

We believe that engaged colleagues are more likely to drive customer service delivery and, in turn, to create sustainable and profitable growth. Our survey, called 'You Talk, We Listen', produced a significant 25% improvement in engagement scores across all respondents. Over 70% of our people took the time to complete the questionnaire.

The survey found that 82% of colleagues are proud to work in their particular branch or department and 70% were proud to be part of the Company. This harmony has undoubtedly led to all 11 of our businesses outperforming the sector in which they operate.

Unlike 2009 when we had to reduce the workforce, last year we maintained our staffing level in a carefully controlled way.

There are many 'stars' in the Group. There are far too many to mention them all here, but I would like to recognise the work by individuals who have led the achievements of our many teams: our category management director Norman Bell, supply chain director Robin Proctor, global sourcing director Ian Preedy and the Group's human resources director Carol Kavanagh, plus our divisional chairmen Joe Mescall, Arthur Davidson and Jeremy Bird.

Many of those individuals have very many years of loyal service and we have benefited from the dedication of a stable and robust merchanting team and a fusion of new blood and new skills from the senior figures in our retail businesses.

The Group thrives on the selection, recruitment and induction of its people. During challenging times, we have used our training and development resources to keep our people motivated and engaged.

It is critical to my role that I walk the branches and the warehouses. I am continually proud and encouraged by the commitment shown in all areas of our businesses.

INFRASTRUCTURE INVESTMENT & PRODUCT AVAILABILITY DISCIPLINES

The working environment across the Group is results-orientated. Last year we continued to drive our self-help programme. On the merchanting side, we identified up to a dozen work streams where we could make a significant difference, delivering goods quickly, speeding up our service and ensuring we stocked sufficient quantities of product to suit our customers' demand.

On the retail side, and with Wickes in particular, we focussed on three main strands of activity: to be a specialist kitchens and bathrooms distributor, to be more focussed on the trade element of DIY (i.e. the small trader) and to become a multi-channel business by adopting an approach of 'anything, anywhere, anytime' with three routes to market via stores, telephone sales or online. This gives our customers the option to access our goods in a variety of ways.

SUPPLY CHAIN GAINS & GLOBAL SOURCING

The essence of the Group's supply chain is to have the right products in the right place at the right time. Through detailed research and consultation with customers, we have developed a core range of goods, called the mandated range. This comprises about 1,500 products (or Stock Keeping Units) that MUST be stocked in sufficient quantity for a customer to complete an entire project purchase, rather than a single unit being classed as meeting a customer's needs. As a result, our availability targets are more challenging to meet, however, as we improve our performance the sales rewards are much greater. We started extending this programme in September 2010 and will increase its coverage from 50% of our sales to 75% of sales (our expected maximum) during 2011.

We have significantly improved the utilisation of our 2,000 commercial vehicles through GPS tracking, which has helped reduce our vehicle CO2 emissions by 812 tonnes. The addition of a 500,000 sqft warehouse to the distribution network and the opening of a 'heavyside' regional distribution hub have greatly improved our efficiency in moving goods to the right locations at the right times.

Another critical innovation has been the introduction of a new daily IT alert. All of our branch managers receive a daily communication informing them of product quantity and availability in their branch. In addition, the senior managers of our suppliers are also notified of their product availability. This tells our suppliers about their missed opportunities for potential sales throughout our branches. We set tough targets, but it has proved to be a highly-effective self-managing process.

Our sourcing is a truly global activity. Sixty countries manufacture goods for the Group, covering every continent, except Antarctica.

We buy a significant quantity of product direct from between 15 and 20 countries, including ceramics and plywood from Brazil, timber from Scandinavia, pottery from Morocco and stone and variety of other goods from India. Increasingly we deal directly with the manufacturers, rather than engaging specialist 'intermediaries'. Often we take responsibility for the product once it comes off the production line and have a team of people who are in charge of quality control at the manufacturing source. In these cases we are totally in control of packing and distributing the goods from the 14 factories who supply us back to our own distribution hubs in the UK.

Our sourcing activity has had a positive effect on our margins. It has also been a great learning curve, dramatically changing the way we operate and requiring many administrative departments within the Group to adapt their systems accordingly.

We have opened a consolidation centre in Shanghai, which has greatly improved our trading in China. The Group buys products from 85 manufacturers in China, but often in insufficient quantities to fill a container for immediate transport back to the UK. However, the new centre enables us to store goods safely and securely until the time there is sufficient stock to fill a freight container.

We want to buy the best possible products at the best possible price, but we are not prepared to compromise our standards by dealing with unethical companies. We do not trade with suppliers who fail to meet our strict standards in staff welfare, health and safety and care for the environment. We are proud to set the standard for our sector.

BSS INTEGRATION

I lead the integration team for BSS. A detailed integration plan was developed during the drawn-out negotiation with the OFT last year. A four-phase plan was initiated on December 14 2010:

· Phase 1: Communication. In the first few days we had meetings with as many BSS personnel as possible to brief them on our plans and to welcome them to the Travis Perkins Group;

· Phase 2: Definition. This involved understanding and prioritising the key projects - particularly the early synergy-bearing opportunities;

· Phase 3 Synergies and overheads - our current activity;

· Phase 4: Long-term structural projects, such as IT and harmonising supply chains.

MERCHANTING

All four Travis Perkins branded businesses produced strong like-for-like sales growth and increased market share, while trading margin was maintained and good profit growth was achieved.

Eight new branches were opened and key sales projects were successfully undertaken to increase the number of accounts opened. Product availability continued to increase and strong productivity growth was achieved, together with enhanced multi-skill training for branch colleagues.

City Plumbing Supplies

Thanks to improved sourcing, City Plumbing improved its gross margin and showed a strong growth in profits. The business achieved a consistently high sales performance and its own label, iflo, performed well.

CCF

The business extended its flooring range and, with the help of improved supply chain initiatives, CCF enjoyed strong growth. Three branches relocated to better premises.

Keyline

The 'Best in Town' programme delivered improved performance, with strong growth in the civils and drainage sector in the second half of the year. Trading margins were maintained and good profit growth was achieved.

Benchmarx

Twenty-one new businesses were opened on existing group sites and a further two stand-alone branches. The company achieved very strong like-for-like sales growth.

RETAIL

Wickes

Wickes achieved significant additional sales, thanks to its next-day delivery service six days per week, its stand-alone kitchen and bathroom stores and a new paint range. There continues to be considerable investment in the online and catalogue side of the business.

ToolStation

Turnover increased by 70% to £70 million with an increase in its customer base of 479,000. There are now 84 stores, serving 85,000 customers each week.

Tile Giant

There were 15 new branch openings last year, taking the total number to 101. Market share has grown to over 4% of the UK tile market.

THE YEAR AHEAD

2011 will again be a difficult year, but we have invested a great deal of time in developing operational systems that enable us to compete in the marketplace better than our rivals. We have innovative and exciting projects and work streams ready to roll out this year and we feel confident about being able to outgrow our competitors by being better.

We have the best teams in the sector. It will be a year for integrating BSS, achieving synergies and giving our businesses the support they need.

John Carter

Chief Operating Officer

22 February 2011

FINANCE DIRECTOR'S REVIEW OF THE YEAR

For the year ended 31 December 2010

INTRODUCTION

The acquisition of BSS, finally completed on 14 December, was the key highlight of 2010. The acquisition process took from April to December, longer than we initially anticipated, and absorbed much management time, but was completed on satisfactory terms.

But it was not the only highlight of last year.

We produced a healthy 20% increase in adjusted pre-tax profits to £217m with the merchanting division performing ahead of our expectations at the beginning of the year.

Our working capital management was also very strong and, with tight controls on capital expenditure, we were able to deliver a substantial reduction in underlying debt of £205m, which showed considerable progress in the light of the challenging economic climate.

STRONGEST LIKE-FOR-LIKE PERFORMANCE ON RECORD

Our concentration on achieving further gains in market share at satisfactory profit margin led to the strongest relative like-for-like trading performance, around 4% ahead of the trade market and around 6% ahead of the retail market, since I became Finance Director fifteen years ago. In such difficult economic circumstances, this was a major achievement.

FINANCIAL OBJECTIVES ACHIEVED

Our principal objectives for 2010 were to reduce group borrowings through cash generation, continue the creation of shareholder value by increasing profits and increase the Group's market share via like-for-like sales growth, expansion through acquisitions and in-store developments. We exceeded those targets, when the effect of the acquisition of BSS is excluded from net debt.

Thanks to better market conditions in Q2 and Q3 last year, our merchanting businesses performed very strongly due to a programme of sustainable organic growth, while our retail businesses also performed well.

The Group's operating margins were very healthy, with merchanting operating at 8.8%, while in retail we achieved a 5.9% margin. Both merchanting and retail were the highest in their respective sectors.

The Group incurred net exceptional operating charges of £19m in 2010. £21m of exceptional costs related to the acquisition of BSS, which comprised £13m of professional and bank fees and £8m of charges arising from post acquisition adjustments to assets and liabilities in the books of BSS. There was a £2m exceptional credit to operating profit due to the partial release of exceptional onerous lease provisions established in 2008. After charging these exceptional operating items, operating profit was £220m (2009: £257m).

Overall, lower interest rates combined with significantly lower borrowings following the rights issue have reduced net finance charges, excluding the effects of an exceptional bank fee write-off and other finance income and charges associated with the pension scheme, by £13m (31%). The average interest rate during the year was 3.1% (2009:3.7%).

Excluding the effect of exceptional items the adjusted tax charge was £60m, an effective rate of 27.6% compared with £46m (25.6%) in 2009. The increase was due mainly to the non-recurrence of the reduced IFRS 2 share option charge in 2009.

Basic earnings per share were 69.6 pence (2009: 88.4 pence). Adjusted earnings per share (note 12b) were 77.2 pence (2009: 75.2 pence) a 2.7% increase. This reflects the 13% dilution of the £300m rights issue in the middle of 2009. There is no significant difference between basic and diluted earnings per share.

The following table shows the Group's key performance indicators:

	2010	2009	2008	2007
Revenue growth / (decline)	7.6%	(7.8)%	(0.3)%	11.9%
LFL revenue growth / (decline)	5.0%	(8.6)%	(4.5)%	8.1%
Adjusted operating profit to sales ratio	7.6%	7.7%	8.5%	10.0%
Profit before tax (decline) / growth	(7.5)%	45.4%	(44.0)%	12.7%
Adjusted profit before tax growth / (decline)	20.3%	(11.3)%	(22.5)%	18.7%
Net debt to adjusted EBITDA (note 38)	1.9x	1.5x	2.8x	2.5x
Adjusted interest cover (note 10)	18.9x	10.7x	4.3x	5.4x
Adjusted return on capital (note 37)	12.2%	10.9%	12.9%	15.9%
Free cash flow (note 36)	£277.8m	£294.4m	£185.3m	£157.8m
Adjusted dividend cover (note 13)	5.1x	-	8.5x	3.3x

The Directors remain committed to the generation of long-term shareholder value, which we believe will be achieved through:

· Increasing the Group's market share via a combination of LFL sales growth and targeted expansion through acquisitions, brown field openings and in-store development;

· Improving profitability with a medium term target for profit growth in percentage terms exceeding that for sales;

· Investing in projects and acquisitions where the post-tax return on capital employed exceeds the weighted average cost of capital of the Group by a minimum of 4%;

· Generating sufficient free cash flow to enable the Group to expand its operations whilst funding attractive returns to shareholders, reducing its debt and pension deficit;

· Operating an efficient balance sheet, by structuring sources of capital to minimise the Group's weighted average cost of capital consistent with maintaining an investment grade financial profile with the ratio of net debt to EBITDA being between one and two and a half times;

· Maintaining long-term dividend cover at between two and a half and three and a half times earnings.

CONTINUED FOCUS ON STRONG CASH GENERATION

Despite the tough operating conditions, the Group still managed to generate £343m from operations, before exceptional and special pension cash flows of £53m. Free cash flow for the year was £278m (2009:£294m).

Before including the £295m cash element of the BSS acquisition and disposal proceeds of £17m, gross capital expenditure and investment totalled £65m. £24m was spent on capital replacements, and £41m on expansion, including £13m on ToolStation. We believe our culture of undertaking small incremental improvement projects with strict return criteria for each expansion project is a major strength of the Group.

Excluding the £477m effect of acquiring BSS and the £35m one-off pension payment, net debt reduced by £205m to £262m at the end of 2010. At 31 December total debt was £774m.

At 31 December 2010, the Group had committed UK bank facilities of £857m and $525m of $US private placement notes in issue. In agreement with its lenders, during the year the Group bought in, but did not cancel £84m of its £1,000m revolving credit facility in return for a profit of £3m, which has benefited finance charges in the income statement.

At the instigation of one of the Group's counterparty banks, the Group realised £14m cash from cancelling an in the money cross currency swap associated with its US private placement borrowings. This derivative has been replaced by four US Dollar forward contracts.

The peak and minimum levels of daily borrowings on a cleared basis during the year ended 31 December 2010 was £876m and £551m respectively (2009: £1,083m and £438m). The maximum month end cleared borrowings were £736m (2009: £1,035m). At 31 December 2010 the Group had undrawn committed facilities of £493m (2009: £515m).

Note 31 gives details about the Group's operating lease commitments, most of which relate to properties occupied by the Group for trading purposes.

PENSION FUND INTO SURPLUS

At 31 December 2009 the gross deficit of the Travis Perkins' final salary pension scheme was £43m which following negotiations with the Scheme Trustee, the Group has agreed to eliminate over an eight-year period.

In June 2010 we reached a further agreement to fund £35m of the deficit using a group controlled special purpose vehicle ('SPV'). The pension scheme will be entitled to receive the income of the SPV for a period of up to 20 years, subject to funding levels, and this income is backed by the security of 16 Travis Perkins' freehold properties. The existing cash contributions to reduce the deficit of the pension scheme will fall from £18m in 2010 to £16m in 2011.

Due to the combination of the one-off £35m contribution to the fund and the strong performance of the fund, the capping of pensionable salaries at 3% in December 2009 and the increase in employees' contributions in April 2009, the Travis Perkins pension scheme now has an accounting surplus of £32m. The BSS pension schemes have an accounting deficit of £60m, using the same actuarial assumptions as the Travis Perkins' scheme.

EXTRACTING VALUE FROM OUR PROPERTY PORTFOLIO

The Group currently owns about 341 freehold sites, giving us flexibility operationally. One example of this is our site in Guildford, where we have located Travis Perkins and City Plumbing branches. We are now also building a new Wickes store and selling some of the excess land for £11m. Capital expenditure on this project will be £6m.

Our property team makes a very important contribution to our operations. We now expect to make approximately £10m of property profits and generate £15m to £20m of cash from this activity each year. At the year-end, the carrying value of our freehold and long leasehold property portfolio was £262m compared to £247m at the end of 2009.

CAPITAL EMPLOYED AND BALANCE SHEET

Capital employed at the end of 2010 was £1,952m and the Group's adjusted return on capital for the year was 12.2%, which continues to be above our weighted average cost of capital of 8.1%.

Our business volumes continue to run at around 20% below the peak at the high part of the cycle - and at the low point were some 30% lower - but our returns throughout this period have continued to exceed our weighted average cost of capital.

Our balance sheet remains very strong and once again there were no impairments to the carrying values of goodwill and other intangible assets. Across the Group, our operating assets continue to be highly cash and profits generative.

During the year, the daily closing share price ranged between 665p and 1,058p. The shares closed the year at 1,058p, 466p above the June 2009 theoretical rights issue price of £592p, which resulted in a total market value or market capitalisation of £2.56bn.

EFFECTIVE FINANCIAL RISK MANAGEMENT

The principal risks and uncertainties of the business are covered under a separate summary report on pages 49 to 54. In summary, the key points of our financial risk management are:

· The Group seeks to maintain a strong balance sheet;

· Effective cash and working capital management is accorded top priority;

· We retain significant headroom of over £200m in our borrowing facilities and we have good relationships with our bankers;

· We operate within comfortable margins to our banking covenants:

· the ratio of net debt to EBITDA (earnings before interest, tax and depreciation) has to be lower than 3.5; it was approximately 1.9 at the year-end; and

· the number of times operating profit covers interest charges has to be a least 3.5 times and it was nearly 20 times in 2010.

· We serve over 150,000 'live' customer accounts and no one customer accounts for more than 1% of our sales; the bad debt charge was 0.59% of credit sales;

· Our product selling prices tend to reflect inflation in materials prices;

· We conducted extensive due diligence on BSS ahead of acquiring the business.

INTEGRATING BSS

BSS was a financially and operationally well-managed company, but not unexpectedly, there is a great deal of work to do to bring our two systems together. This work is well underway and we expect a relatively smooth and swift integration process for our financial reporting, analysis and management systems.

In 2011 we have embarked on driving out the synergy benefits from combining BSS with Travis Perkins and on integrating information flows and reporting.

Paul Hampden Smith

Finance Director

22 February 2011

STATEMENT OF DIRECTORS' RESPONSIBILITIES

For the year ended 31 December 2010

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the Parent Company financial statements under IFRSs as adopted by the EU. Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors:

· Properly select and apply accounting policies;

· Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· Make an assessment of the Company's ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

· The financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· The management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board


Geoff Cooper		Paul Hampden Smith
Chief Executive		Finance Director
22 February 2011

Consolidated income statement

For the year ended 31 December 2010


	2010	2010	2010	2009	2009	2009
	Pre- exceptional items	Exceptional items	Total	Pre- exceptional items	Exceptional items	Total
	£m	£m	£m	£m	£m	£m
Revenue	3,152.8	-	3,152.8	2,930.9	-	2,930.9
Operating profit before amortisation	239.0	(19.0)	220.0	224.6	32.7	257.3
Amortisation of intangible assets	(0.2)	-	(0.2)	-	-	-
Operating profit	238.8	(19.0)	219.8	224.6	32.7	257.3
Finance income	17.5	-	17.5	5.6	-	5.6
Finance costs	(39.8)	(0.7)	(40.5)	(50.2)	-	(50.2)
Profit before tax	216.5	(19.7)	196.8	180.0	32.7	212.7
Tax	(59.8)	4.3	(55.5)	(46.1)	(9.2)	(55.3)
Profit for the year	156.7	(15.4)	141.3	133.9	23.5	157.4
Earnings per ordinary share
Basic			69.6p			88.4p
Diluted			67.2p			86.2p
Total dividend declared per ordinary share			15.0p			-

All results relate to continuing operations.

Details of exceptional items are given in notes 6, 7 and 8.

Consolidated statement of comprehensive income

For the year ended 31 December 2010

	2010	2009
	£m	£m
Profit for the year	141.3	157.4
Cash flow hedges: (Losses) / gains arising during the year	(4.4)	14.7
Transferred to income statement	6.8	0.4
	2.4	15.1
Actuarial gains / (losses) on defined benefit pension schemes	15.9	(28.3)
	18.3	(13.2)
Movement on cash flow hedge cancellation payment	4.8	(14.0)
Tax relating to components of other comprehensive income	(6.7)	12.5
Other comprehensive income / (loss) for the year	16.4	(14.7)
Total comprehensive income for the year	157.7	142.7

Consolidated balance sheet

As at 31 December 2010

	2010	2009
	£m	£m
ASSETS
Non-current assets
Property, plant and equipment	526.0	499.0
Goodwill	1,690.4	1,352.8
Other intangible assets	411.5	162.5
Derivative financial instruments	56.9	44.7
Investment property	0.4	3.3
Interest in associates	45.7	31.7
Available-for-sale investments	1.5	1.5
Deferred tax asset	16.4	12.0
Total non-current assets	2,748.8	2,107.5
Current assets
Inventories	571.6	312.7
Trade and other receivables	692.5	375.4
Derivative financial instruments	0.1	-
Assets held for resale	2.3	-
Cash and cash equivalents	62.9	347.2
Total current assets	1,329.4	1,035.3
Total assets	4,078.2	3,142.8

Consolidated balance sheet (continued)

As at 31 December 2010

	2010	2009
	£m	£m
EQUITY AND LIABILITIES
Capital and reserves
Issued capital	24.2	20.9
Share premium account	471.5	471.2
Merger reserve	325.9	-
Other reserve	21.3	21.3
Hedging reserve	(6.9)	(12.1)
Own shares	(83.4)	(83.7)
Accumulated profits	1,199.2	1,042.8
Total equity	1,951.8	1,460.4
Non-current liabilities
Interest bearing loans and borrowings	760.9	739.1
Derivative financial instruments	4.2	6.1
Retirement benefit obligation	27.9	43.0
Long-term provisions	36.0	43.7
Deferred tax liabilities	126.9	62.8
Total non-current liabilities	955.9	894.7
Current liabilities
Interest bearing loans and borrowings	72.3	71.5
Unsecured loan notes	3.3	3.8
Trade and other payables	999.9	638.7
Derivative financial instruments	2.5	-
Tax liabilities	39.4	28.1
Short-term provisions	53.1	45.6
Total current liabilities	1,170.5	787.7
Total liabilities	2,126.4	1,682.4
Total equity and liabilities	4,078.2	3,142.8

The financial statements of Travis Perkins plc, registered number 824821, were approved by the Board of Directors on 22 February 2011 and signed on its behalf by:

Geoff Cooper
Paul Hampden Smith		Directors

Consolidated statement of changes in equity

	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 2009	12.3	179.5	-	23.8	(17.8)	(83.7)	904.1	1,018.2
Profit for the year	-	-	-	-	-	-	157.4	157.4
Cash flow hedge gains	-	-	-	-	15.1	-	-	15.1
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	(28.3)	(28.3)
Unamortised cash flow hedge cancellation payment	-	-	-	-	(14.0)	-	-	(14.0)
Tax relating to comprehensive income	-	-	-	-	4.6	-	7.9	12.5
Total comprehensive income for the year	-	-	-	-	5.7	-	137.0	142.7
Issue of share capital	8.6	304.9	-	-	-	-	-	313.5
Costs of issuing shares	-	(13.2)	-	-	-	-	-	(13.2)
Realisation of revaluation reserve in respect of property disposals	-	-	-	(2.1)	-	-	2.1	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.4)	-	-	0.4	-
Debit to equity for equity-settled share based payments	-	-	-	-	-	-	(0.8)	(0.8)
At 31 December 2009	20.9	471.2	-	21.3	(12.1)	(83.7)	1,042.8	1,460.4
Profit for the year	-	-	-	-	-	-	141.3	141.3
Cash flow hedge gains	-	-	-	-	2.4	-	-	2.4
Actuarial losses on defined benefit pension schemes	-	-	-	-	-	-	15.9	15.9
Unamortised cash flow hedge cancellation payment	-	-	-	-	4.8	-	-	4.8
Tax relating to comprehensive income	-	-	-	-	(2.0)	-	(4.7)	(6.7)
Total comprehensive income for the year	-	-	-	-	5.2	-	152.5	157.7
Dividends	-	-	-	-	-	-	(10.1)	(10.1)
Issue of share capital	3.3	0.3	325.9	-		0.3	(0.3)	329.5
Realisation of revaluation reserve in respect of property disposals	-	-	-	(0.2)	-	-	0.2	-
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	-	-	(0.2)	-	-	0.2	-
Deferred tax rate change	-	-	-	0.4	-	-	-	0.4
Credit to equity for equity-settled share based payments	-	-	-	-		-	13.9	13.9
At 31 December 2010	24.2	471.5	325.9	21.3	(6.9)	(83.4)	1,199.2	1,951.8

Consolidated cash flow statement

For the year ended 31 December 2010

	2010	2009
	£m	£m
Operating profit before exceptional items	238.8	224.6
Adjustments for:
Depreciation and impairment of property, plant and equipment	57.5	58.7
Other non cash movements	8.0	(1.5)
Amortisation of intangible assets	0.2	-
Impairment of investment	-	0.5
Losses of associate	2.1	3.2
Gain on disposal of property, plant and equipment and investment	(11.3)	(12.0)
Operating cash flows before movements in working capital	295.3	273.5
(Increase) / decrease in inventories	(62.3)	9.2
(Increase) / decrease in receivables	(3.2)	12.4
Increase in payables	112.8	52.3
Payments on exceptional items	(7.6)	(2.5)
Payments to the pension scheme in excess of the charge to profits	(52.7)	(25.1)
Cash generated from operations	282.3	319.8
Interest paid	(25.4)	(30.5)
Swap cancellation payment	-	(28.7)
Income taxes paid	(42.4)	(27.3)
Net cash from operating activities	214.5	233.3
Cash flows from investing activities
Interest received	9.4	1.5
Proceeds on disposal of property, plant and equipment and investment	17.2	20.8
Purchases of property, plant and equipment	(52.6)	(28.6)
Interest in associate	(12.5)	(12.9)
Acquisition of businesses net of cash acquired (note 15)	(294.9)	(1.0)
Net cash used in investing activities	(333.4)	(20.2)
Financing activities
Net proceeds from the issue of share capital	0.3	300.3
Swap cancellation receipt	13.7	-
Payment of finance lease liabilities	(1.3)	(1.5)
Repayment of unsecured loan notes	(0.6)	(0.1)
Pension SPV	34.7	-
Decrease in bank loans	(214.1)	(160.0)
Dividends paid	(10.1)	-
Net cash from financing activities	(177.4)	138.7
Net (decrease) / increase in cash and cash equivalents	(296.3)	351.8
Cash and cash equivalents at beginning of year	347.2	(4.6)
Cash and cash equivalents at end of year	50.9	347.2

Notes

1. The Group's principal accounting policies are set out in the 2009 annual report, which is available on the Company's website www.travisperkinsplc.com. They have been applied consistently in 2010 other than those in respect of IFRS 3 (revised) Business Combinations, which have been adopted by the Group during the year.

2. The proposed final dividend is 10 pence (2009: nil pence) payable on 31 May 2011. The record date is 6 May 2011.

3. The financial information set out in this statement does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 31 December 2009, but is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRS") this announcement does not itself contain sufficient information to comply with IFRS.

4. This announcement was approved by the Board of Directors on 22 February 2011.

5. It is intended to post the annual report to shareholders on 18 April 2011 and to hold the Annual General Meeting on 26 May 2011. Copies of the annual report prepared in accordance with IFRS will be available from the Company Secretary, Travis Perkins plc, Lodge Way House, Harlestone Road, Northampton NN5 7UG from 18 April 2011 or will be available through the internet on our website at www.travisperkinsplc.com.

6. Profit

(a) Operating profit

	2010	2009
	£m	£m
Revenue	3,152.8	2,930.9
Cost of sales	(2,081.5)	(1,944.4)
Gross profit	1,071.3	986.5
Selling and distribution costs	(675.8)	(649.8)
Administrative expenses	(189.0)	(125.0)
Other operating income	15.4	48.8
Share of results of associate	(2.1)	(3.2)
Operating profit	219.8	257.3
Exceptional items	19.0	(32.7)
Amortisation of intangible assets	0.2	-
Adjusted operating profit	239.0	224.6

On 14 December 2010 the group acquired 100% of the issued share capital of The BSS Group plc for total consideration of £623.9m. As required by IFRS 3 (2008), £13m of costs incurred in making the acquisition and £8.1m of non-fair value charges incurred in respect of assets written out of the opening BSS group balance sheet have been charged to the income statement as exceptional items and included in administrative expenses. Offset against the exceptional charges is the release of £2.1m of onerous lease provisions which were originally established in 2008 as exceptional charges to the income statement. The net total of exceptional items is £19.0m.

6. Profit (continued)

With effect from the 1 December 2009 the Company and the Trustees of the Travis Perkins defined benefits scheme agreed to amend the terms of the Scheme to include a cap on future pensionable salary increases of 3% per annum. This was treated as a curtailment event and the resulting exceptional reduction of £32.7m in the benefit obligation was included in other operating income in 2009.

To enable readers of the financial statements to obtain a clear understanding of underlying trading, the Directors have shown the exceptional items separately in the group income statement.

(b) Adjusted profit before and after tax

	2010	2009
	£m	£m
Profit before tax	196.8	212.7
Exceptional items	19.7	(32.7)
Amortisation of intangible assets	0.2	-
Adjusted profit before tax	216.7	180.0

Profit after tax	141.3	157.4
Exceptional items	19.7	(32.7)
Tax on exceptional items	(1.9)	9.2
Amortisation of intangible assets	0.2	-
Effect of reduction in corporation tax rate on deferred tax	(2.4)	-
Adjusted profit after tax	156.9	133.9

	Merchanting		Retail		Unallocated		Group Pre BSS		BSS		Group
	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009	2010	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue	2,106.5	1,950.2	1,002.9	980.7	-	-	3,109.4	2,930.9	43.4	-	3,152.8	2,930.9

Operating profit	174.1	203.5	58.7	57.0	-	-	232.8	260.5	(10.9)	-	221.9	260.5
Share of associate losses	-	-	-	-	(2.1)	(3.2)	(2.1)	(3.2)	-	-	(2.1)	(3.2)
Amortisation of intangible assets	-	-	-	-	-	-	-	-	0.2	-	0.2	-
Exceptional items	10.3	(32.7)	0.6	-	-	-	10.9	(32.7)	8.1	-	19.0	(32.7)
Adjusted segment result	184.4	170.8	59.3	57.0	(2.1)	(3.2)	241.6	224.6	(2.6)	-	239.0	224.6

Adjusted operating margin	8.76%	8.76%	5.91%	5.81%	-	-	7.77%	7.66%	(5.99)%	-	7.58%	7.66%

Segmental information is shown in note 10.

7. Net finance costs

	2010				2009
	Pre- exceptional items	Exceptional items	Total	Total
	£m	£m	£m	£m
Interest on bank loans and overdrafts*	(27.8)	(0.7)	(28.5)	(29.1)
Interest on unsecured loans	(0.2)	-	(0.2)	(0.2)
Interest on obligations under finance leases	(1.2)	-	(1.2)	(1.3)
Other finance charges - pension scheme	-	-	-	(2.6)
Unwinding of discounts	(4.2)	-	(4.2)	(3.8)
Amortisation of cancellation payment for swaps accounted for as cash flow hedges	(4.9)	-	(4.9)	(8.7)
Cancellation of swaps measured at fair value	-	-	-	(0.8)
Net loss on re-measurement of derivatives at fair value	(1.5)	-	(1.5)	(3.7)
Finance costs	(39.8)	(0.7)	(40.5)	(50.2)
Other finance income - pension scheme	6.2	-	6.2	-
Amortisation of cancellation receipt for swap accounted for as fair value hedge	0.9	-	0.9	-
Interest receivable	10.4	-	10.4	5.6
Finance income	17.5	-	17.5	5.6
Net finance costs	(22.3)	(0.7)	(23.0)	(44.6)
Adjusted interest cover			18.9x	10.7x

*Includes £5.7m (2009: £2.9m) of amortised bank finance charges.

Adjusted interest cover is calculated by dividing, adjusted operating profit of £239.0m (2009: £224.6m) less £1.2m (2009: £1.3m) of specifically excluded IFRS adjustments, by the combined value of interest on bank loans and overdrafts (excluding amortised bank finance charges), unsecured loans, and interest receivable, which total £12.6m (2009: £20.8m).

The unwinding of the discount charge arises principally from the property provisions created in 2008 and the pension SPV.

Included in interest on bank loans and overdrafts is a fair value and exchange gains on the US private placement of £3.1m offset by a £3.1m loss on hedged derivatives.

Included within finance costs is an exceptional charge of £0.7m arising from the write off of unamortised bank fees in respect of the BSS loan facility which was repaid following the acquisition.

8. Earnings per share

(a) Basic and diluted earnings per share

	2010	2009
	£m	£m
Earnings
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the Parent Company	141.3	157.4
Number of shares	No.	No.
Weighted average number of shares for the purposes of basic earnings pre share pre-rights issue adjustment & BSS acquisition share issue	201,682,453	117,034,434
Rights issue adjustment	-	61,001,501
Issued in connection with the BSS acquisition	1,444,926	-
Weighted average number of shares for the purposes of basic earnings per share	203,127,379	178,035,935
Dilutive effect of share options on potential ordinary shares	7,099,195	4,427,564
Weighted average number of ordinary shares for the purposes of diluted earnings per share	210,226,574	182,463,499

At 31 December 2010, 2,450,045 (2009: 3,913,130) share options had an exercise price in excess of the market value of the shares on that day. As a result these share options were excluded from the calculation of diluted earnings per share.

(b) Adjusted earnings per share

Adjusted earnings per share are calculated by excluding the effect of the exceptional items and amortisation from earnings.

	2010	2009
	£m	£m
Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity holders of the Parent Company	141.3	157.4
Exceptional items	19.7	(32.7)
Amortisation of intangible assets	0.2	-
Tax on exceptional items	(1.9)	9.2
Effect of reduction in corporation tax rate on deferred tax	(2.4)	-
Earnings for adjusted earnings per share	156.9	133.9
Adjusted basic earnings per share	77.2p	75.2p
Adjusted diluted earnings per share	74.6p	73.4p

The tax charge for 2010 includes an exceptional credit of £2.4m arising from the reduction in the rate of UK corporation tax from 28% to 27% on 6 April 2011.

8. Earnings per share (continued)

	2010	2009
	£m	£m
Earnings for adjusted earnings per share	156.9	133.9
BSS post tax loss for the period	2.0	-
Earnings for adjusted earnings per share pre-BSS	158.9	133.9
Adjusted basic earnings per share pre- BSS	78.8p	75.2p

9. Dividends

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

	2010	2009
	£m	£m
Final dividend for the year ended 31 December 2009 of nil p (2008: nil p) per ordinary share	-	-
Interim dividend for the year ended 31 December 2010 of 5p (2009: nil p) per ordinary share	10.1	-
Total dividends recognised during the year	10.1	-

The dividends declared for 2010 at 31 December 2010 and for 2009 at 31 December 2009 were as follows:

	2010	2009
	Pence	Pence
Interim paid	5.0	-
Final proposed	10.0	-
Total dividends for the year	15.0	-

The proposed final dividend of 10p per ordinary share in respect of the year ended 31 December 2010 was approved by the board on 22 February 2011.

Adjusted dividend cover of 5.1x (2009: nil) is calculated by dividing adjusted basic earnings per share (note 8b) of 77.2 pence (2009: 75.2 pence) by the total dividend for the year of 15.0 pence (2009: nil pence)

10. Business and geographical segments

	2010
	Merchanting	Retail	BSS	Unallocated	Eliminations	Consolidated
	£m	£m	£m	£m	£m	£m
Revenue	2,106.5	1,002.9	43.4	-	-	3,152.8
Result
Segment result	174.1	58.7	(10.9)	-	-	221.9

Share of associate losses	-	-	-	(2.1)	-	(2.1)
Finance income	-	-	-	17.5	-	17.5
Finance costs	-	-	-	(40.5)	-	(40.5)
Profit before taxation	174.1	58.7	(10.9)	(25.1)	-	196.8
Taxation	-	-	-	(55.5)	-	(55.5)
Profit for the year	174.1	58.7	(10.9)	(80.6)	-	141.3

Segment assets	2,543.8	1,498.5	1,128.4	308.8	(1,401.3)	4,078.2
Segment liabilities	(865.6)	(215.3)	(466.1)	(1,980.7)	1,401.3	(2,126.4)
Consolidated net assets	1,678.2	1,283.2	662.3	(1,671.9)	-	1,951.8
Capital expenditure	44.5	7.2	-	0.2	-	51.9
Amortisation	-	-	0.2	-	-	0.2
Depreciation	43.3	13.7	0.5	-	-	57.5

For management purposes, the Group is currently organised into three operating divisions - Builders Merchanting, Retailing and BSS, which operate mainly in the United Kingdom. Segment profit represents the profit earned by each segment without allocation of share of losses of associates, finance income and costs and income tax expense.

There are no significant inter-segment sales.

During 2010 and 2009, other than in respect of fair value adjustments and exceptional charges made in respect of BSS assets, there were no impairment losses or reversals of impairment losses recognised in profit or loss or in equity in any of the reportable segments.

10. Business and geographical segments (continued)

	2009
	Merchanting	Retail	Unallocated	Eliminations	Consolidated
	£m	£m	£m	£m	£m
Revenue	1,950.2	980.7	-	-	2,930.9
Result
Segment result	203.5	57.0	-	-	260.5

Share of associate losses	-	-	(3.2)	-	(3.2)
Finance income	-	-	5.6	-	5.6
Finance costs	-	-	(50.2)	-	(50.2)
Profit before taxation	203.5	57.0	(47.8)	-	212.7
Taxation	-	-	(55.3)	-	(55.3)
Profit for the year	203.5	57.0	(103.1)	-	157.4

Segment assets	2,234.5	1,438.8	524.5	(1,055.0)	3,142.8
Segment liabilities	(725.7)	(237.5)	(1,774.2)	1,055.0	(1,682.4)
Consolidated net assets	1,508.8	1,201.3	(1,249.7)	-	1,460.4
Capital expenditure	16.0	16.1	-	-	32.1
Depreciation	44.1	14.6	-	-	58.7

11. Adjusted return on capital

	2010	2009
	£m	£m
Operating profit	219.8	257.3
Amortisation of intangible assets	0.2	-
BSS post acquisition operating losses (excluding exceptionals)	2.6	-
Exceptional items	19.0	(32.7)
Adjusted operating profit	241.6	224.6
Opening net assets	1,460.4	1,018.2
Net pension deficit	31.0	50.4
Goodwill written off	92.7	92.7
Net borrowings	467.2	1,017.4
Exchange adjustment	(40.5)	(80.2)
Opening capital employed	2,010.8	2,098.5
Closing net assets	1,951.8	1,460.4
BSS post acquisition loss before tax	2.8	-
Shares issued in respect of the BSS acquisition	(329.2)	-
Travis Perkins pension scheme net (surplus) / deficit	(23.1)	31.0
Goodwill written off	92.7	92.7
Net borrowings	773.6	467.2
Borrowings arising from the BSS acquisition	(469.3)	-
Exchange adjustment	(37.4)	(40.5)
Closing capital employed	1,961.9	2,010.8

Average capital employed	1,986.4	2,054.7
Adjusted return on capital	12.2%	10.9%

12. Adjusted earnings before interest, tax and depreciation

	2010 £m	2009 £m
Profit before tax	196.8	212.7
Net finance costs	23.0	44.6
Depreciation, impairments and amortisation	57.7	58.7
EBITDA under IFRS	277.5	316.0
Exceptional operating items	19.0	(32.7)
BSS 2010 pre-acquisition EBITDA	71.3	-
IFRS adjustments not included in covenant calculations	(2.6)	(2.5)
Adjusted EBITDA under covenant calculations	365.2	280.8
Net debt under covenant calculations	701.4	413.1
Adjusted net debt to EBITDA	1.92x	1.47x

13. Net debt

	2010	2009
	£m	£m
Net debt at 1 January	(467.2)	(1,017.4)
(Decrease) / increase in cash and cash equivalents	(296.3)	351.8
Cash flows from debt	167.6	161.6
Decrease in fair value of debt	3.1	39.7
Amortisation of swap cancellation receipt	1.0	-
Discount unwind on SPV	(1.5)	-
Finance charges netted off bank debt	(5.7)	(2.9)
Net debt arising on acquisition	(174.6)	-
Net debt at 31 December	(773.6)	(467.2)

14. Free cash flow

	2010	2009
	£m	£m
Net debt at 1 January	(467.2)	(1,017.4)
Net debt at 31 December	(773.6)	(467.2)
(Decrease) / increase in net debt	(306.4)	550.2
Dividends paid	10.1	-
Net cash outflow for expansion capital expenditure	29.0	11.1
Net cash outflow for acquisitions	294.9	-
Net cash outflow for acquisition of investments	-	1.0
Swap cancellation fee	-	28.7
Amortisation of swap cancellation receipt	(0.9)	-
Discount unwind on SPV	1.5	-
Cash impact of exceptional items	7.6	2.5
Interest in associate	12.5	12.9
Shares issued	(0.3)	(300.3)
Increase fair value of debt	(3.1)	(39.7)
Movement in finance charges netted off bank debt	5.7	2.9
Net debt arising on BSS acquisition	174.6	-
Special pension contributions	52.6	25.1
Free cash flow	277.8	294.4

15. Acquisition of businesses

a) The BSS Group plc (2009: other)

On the 15 December 2010 the Group acquired the entire issued share capital of The BSS Group plc. The acquisition was accounted for using the purchase method of accounting. The acquisition has created the leading plumbing and heating trade and retail distribution business in the UK.

	2010	2009
	Provisional fair value acquired	Fair value acquired
	£m	£m
Net assets acquired:
Property, plant, equipment and investments	36.6	-
Identifiable intangible assets	257.3	-
Derivative financial instruments	14.9	-
Inventories	199.7	-
Trade and other receivables	316.8	0.1
Retirement benefit obligations	(59.6)	-
Trade and other payables and provisions	(247.4)	0.4
Deferred and current tax liabilities	(57.4)	-
Bank overdrafts and loans	(174.6)	(1.8)
	286.3	(1.3)
Goodwill	337.6	1.4
Deferred consideration	-	0.9
Amount payable	623.9	1.0
Satisfied by:
Cash	294.7	1.0
Equity instruments (closing price on 14 December 2010	329.2	-
	623.9	1.0

Due to the close proximity of the date of acquisition of The BSS Group plc to the Group's year-end it has not been possible to under take all of the reviews that the Directors of Travis Perkins believe are necessary to finalise the fair value adjustments relating to the BSS balance sheet on the acquisition date. Accordingly the fair values ascribed to assets and liabilities in the table above are provisional and will be subject to change in the 2011 statutory accounts.

Expenses incurred on the acquisition of The BSS Group plc are discussed in note 6. The total amount of goodwill expected to be deductible for tax purposes is nil.

The identifiable intangible assets comprise customer relationships of £134.8m, brands acquired of £112.9m and computer software of £9.6m.

If the acquisition of The BSS Group plc had been completed on the first day of the financial year, group revenues for the period would have been £4,599m and adjusted group operating profit would have been £300m.

Goodwill arising on acquisitions

The goodwill arising on the acquisition made during the year is attributable to the anticipated profitability of this acquisition and the future operating synergies arising in the enlarged group.

b) Other acquisitions

The Group paid £0.2m for other immaterial acquisitions during 2010.

16. 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. Transactions between the Company and its subsidiaries are disclosed below. In addition the remuneration, and the details of interests in the share capital of the Company, of the Directors, are provided in the audited part of the remuneration report on pages 66 to 71.

The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

	2010 £m	2009 £m
Short term employee benefits	8.0	6.6
Share based payments	3.0	2.3
	11.0	8.9

The Company undertakes the following transactions with its active subsidiaries:

● Providing day-to-day funding from its UK banking facilities;

● Levying an annual management charge to cover services provided to members of the Group of £6.9m (2009: £6.9m);

● Receiving annual dividends totalling £40.3m (2009: £122.4m).

Details of balances outstanding with subsidiary companies are shown in note 19 and on the Balance Sheet on page 82.

There have been no material related party transactions with directors.

Details of transactions with the Group's Associate Companies ToolStation and The Mosaic Tile Company Limited are shown in note 18. Operating transactions with both associates during the year were not significant.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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Publication of the Annual Report

Consolidated income statement

For the year ended 31 December 2010

All results relate to continuing operations.

Consolidated statement of comprehensive income

For the year ended 31 December 2010

Movement on cash flow hedge cancellation payment

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 2009

12.3

179.5

-

23.8

(17.8)

(83.7)

904.1

1,018.2

Profit for the year

-

-

-

-

-

-

157.4

157.4

Cash flow hedge gains

-

-

-

-

15.1

-

-

15.1

Actuarial losses on defined benefit pension schemes

-

-

-

-

-

-

(28.3)

(28.3)

Unamortised cash flow hedge cancellation payment

-

-

-

-

(14.0)

-

-

(14.0)

Tax relating to comprehensive income

-

-

-

-

4.6

-

7.9

12.5

Total comprehensive income for the year

-

-