Rights Issue

RNS Number : 9946R

Travis Perkins PLC

11 May 2009

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA, NEW ZEALAND OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

ALL TERMS ARE DEFINED AT THE BACK OF THIS ANNOUNCEMENT, UNLESS OTHERWISE DEFINED HEREIN.

7.00 a.m.

11 May 2009

Press Release

Travis Perkins plc announces a fully underwritten Rights Issue to raise net proceeds of approximately £300 million

The Board of Travis Perkins plc ('Travis Perkins') today announces a fully underwritten 7 for 10 Rights Issue to raise gross proceeds of approximately £314 million (approximately £300 million net of expenses) through the issue of 85,903,379 New Shares. The Rights Issue is subject to approval by shareholders at an Extraordinary General Meeting expected to be held on or around 27 May 2009.

Highlights

Rights Issue

7 for 10 Rights Issue to raise gross proceeds of approximately £314 million (approximately £300 million net of expenses), through the issue of 85,903,379 New Shares at a price of 365 pence per share, a 38.5 per cent. discount to the theoretical ex-rights price and 51.6 per cent. discount to the closing price of 753.5 pence per Ordinary Share on 8 May 2009 the last business day prior to announcement of the Rights Issue. The Rights Issue has been fully underwritten by the Underwriters.

The Rights Issue should: 

	reduce the Group's net debt and substantially increase financial headroom;
	improve the Group's trading position through the recession;
	increase the flexibility of the Group to operate and invest in its core businesses;
	strengthen the Group's competitive and strategic position to allow it to exploit the recovery potential in its markets and expand as conditions improve; and
	enhance the Group's future access to, and lower the costs of, sources of capital.

Background

The weakening economic conditions which started in 2008 and have continued since then have negatively affected the Group's operating performance. During 2008, the Group sought to address the impact of the decline in its markets by taking a number of cost reducing and cash generating initiatives. These initiatives included significantly reducing headcount, reducing capital expenditure in 2008, reducing working capital, a suspension of the final dividend for 2008 and renegotiating the Group's syndicated credit facilities in April 2008.

In addition to these initiatives, the Board has determined that it is appropriate for the Group to strengthen its balance sheet and overall financial position through a Rights Issue, in order to position the Group to operate more efficiently in the current market conditions, create a stronger position from which to grow and to provide a platform from which it can take advantage of a future recovery in its markets.

Current trading and prospects

	Year-to-date Group overall financial performance ahead of Board expectations
	Market trends broadly in line with the Group's forecast for the recession
	Group revenue for the four months ended 30 April 2009 down by 13.6 per cent. with like-for-like sales down 14.4 per cent.
	Merchanting revenue decline of 18.4 per cent and 19.0 per cent. on a like-for-like basis
	Decline in like-for-like sales evenly balanced between General and Specialist Merchanting
	Against competitive market conditions and continued high cost inflation, Merchanting successful in passing on majority of product cost increases and limiting gross margin erosion
	Retail sales down 1.9 per cent. for the eighteen week period ended 2 May 2009 with like-for-like sales down by 3.6 per cent. on a delivered basis and down 1.6 per cent. on an ordered basis. Trading at Wickes includes:
	Kitchen and bathroom sales up 12.5 per cent. on a delivered basis and up 22.8 per cent. on an ordered basis
	Core products sales down 6.5 per cent on a like-for-like basis
	Revenue boosted by strong showroom performance and new marketing campaign
	Successful Easter period reflected by like-for-like sales improvement for March and April 2009 combined of 2.9 per cent. over the same months in 2008
	Group's net debt position of £984.6 million at 31 March 2009 improved ahead of Board's expectations
	Board expects the Group's markets to continue to weaken until at least the third quarter of 2009
	Recent lead indicators generally show signs of  stabilisation, however the impact of unemployment remains uncertain

Geoff Cooper, Chief Executive of Travis Perkins, said:

'The Rights Issue will strengthen the Group's balance sheet during the current uncertain trading and macro-economic times, as well as position the Group to be ready to take advantage of, and capitalise on opportunities when markets eventually recover. The Group's brands have attractive market positions and the proceeds from the Rights Issue will facilitate our commitment to growing our market share and investing in the business which should lead to long-term shareholder value creation. While the Group remains and expects to remain within its banking covenants, the Rights Issue will provide significant and additional financial headroom.'

  Expected timetable of principal events

Each of the times and dates in the table below is indicative only and may be subject to change.

Extraordinary General Meeting	27 May 2009
Despatch of Provisional Allotment Letters (to Qualifying Non-CREST Shareholders only)	27 May 2009
Dealings in New Shares, nil paid, commence on the London Stock Exchange	8.00 a.m. on 28 May 2009
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters	11.00 a.m. on 11 June 2009
Dealings in New Shares, fully paid, commence on the London Stock Exchange	8.00 a.m. on 12 June 2009
Despatch of definitive share certificates for the New Shares in certificated form	by 26 June 2009

Notes:

(1) The ability to participate in the Rights Issue is subject to certain restrictions relating to Shareholders with registered addresses outside the UK, details of which will be set out in the Prospectus.

(2) The times and dates set out in the expected timetable of principal events above may be adjusted by Travis Perkins (in consultation with the Underwriters), in which event details of the new times and dates will be notified to the FSA, the London Stock Exchange and, where appropriate, Qualifying Shareholders.

(3) Different deadlines and procedures for applications may apply in certain cases. For example, if you hold your Existing Shares through a CREST member or other nominee, that person may set an earlier date for application and payment than the dates noted above.

(4) References to times in this timetable are to London times unless otherwise stated.

Extraordinary General Meeting

Completion of the Rights Issue is subject to a number of conditions, including Shareholder approval being obtained at the Extraordinary General Meeting.

Documentation

A prospectus will be published and a Circular will be sent to Shareholders on or around 11 May 2009 containing full details of the Rights Issue. The Prospectus will be available, free of charge, at Travis Perkins's registered office, Lodge Way House, Lodge Way, Harlestone Road, Northampton NN5 7UG, and on its website //www.travisperkins.co.uk.

This summary should be read in conjunction with the full text of this announcement.

ENQUIRIES

Travis Perkins plc Geoff Cooper, Chief Executive Officer Paul HampdenSmith, Finance Director	Tel: + 44 (0) 1604 683 222
HSBC Bank plc (Joint Financial Adviser, Joint Sponsor, and Joint Global Coordinator) Charles Packshaw Simon Cloke Nick Donald (Corporate Broking)	Tel: + 44 (0) 207 991 8888
Citigroup Global Markets Limited (Joint Global Coordinator and Joint Sponsor) Jan Skarbek Simon Alexander (Corporate Broking)	Tel: + 44 (0) 207 986 4000
Tricorn Partners LLP (Joint Financial Adviser) Michael Pescod Andrew McNaught	Tel: + 44 (0) 207 823 0888
Square1 Consulting Limited David Bick Mark Longson	Tel: + 44 (0) 207 929 5599

Shareholder enquires

If you have questions, please telephone the Shareholder Helpline on the numbers set out below. This Shareholder Helpline is available from 9.00 a.m. to 5.00 p.m. on any London Business Day. Calls to this number are charged at 10 pence per minute if calling from a BT landline; other telephone providers' costs may vary.

Shareholder Helpline telephone numbers

0871 664 0321 (inside the UK) or ([phone] (outside the UK)

Please note that, for legal reasons, the Shareholder Helpline is only able to provide information contained in the Prospectus and information relating to the Company's register of members and is unable to give advice on the merits of the Rights Issue or provide financial, tax or investment advice.

ANALYST PRESENTATION

A meeting for analysts will be hosted by Geoff Cooper, Travis Perkins' Chief Executive Officer. The details of the meeting are as follows:

Venue: the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ

Date & Time: 9.00 a.m. on 11 May 2009. Registration will commence at 8.30 a.m. (London time)

This announcement is an advertisement. It is not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the Prospectus. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to acquire, the Nil Paid Rights, the Fully Paid Rights or the New Shares offered by any person in any jurisdiction in which such an offer or solicitation is unlawful. 

This announcement and the information contained herein do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in the United States. The Nil Paid Rights, the Fully Paid Rights and the New Shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the 'Securities Act'), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the Nil Paid Rights, the Fully Paid Rights or the New Shares in the United States.

This announcement and the information contained herein do not contain or constitute an offer for sale or the solicitation of an offer to purchase securities in Australia, Canada, Japan, South Africa, New Zealand or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction, and no public offer of rights or shares will be made in such jurisdictions. The Nil Paid Rights, the Fully Paid Rights and the New Shares have not been and will not be registered under the securities laws of such jurisdictions and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within such jurisdictions except pursuant to an exemption from and in compliance with any applicable securities laws.

The distribution of this announcement and/or the Prospectus and/or the Provisional Allotment Letters and/or the transfer of the Nil Paid Rights, Fully Paid Rights and/or New Shares into jurisdictions other than the UK may be restricted by law. Persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The Joint Sponsors, the Underwriters and Tricorn Partners are acting exclusively for Travis Perkins and no one else in connection with the Rights Issue and will not regard any other person as their respective client in relation to the Rights Issue and will not be responsible to anyone other than Travis Perkins for providing the protections afforded to their respective clients or for providing advice in relation to the Rights Issue or any matters referred to in this announcement. 

Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters by the FSMA, none of the Underwriters accepts any responsibility whatsoever and makes no representation or warranty, express or implied, for or in respect of the contents of this announcement, including its accuracy, completeness or verification or regarding the legality of an investment in the Nil Paid Rights, the Fully Paid Rights or the New Shares by an offeree or purchaser thereof under the laws applicable to such offeree or purchaser or for any other statement made or purported to be made by them, or on their behalf, in connection with Travis Perkins, the Nil Paid Rights, the Fully Paid Rights, the New Shares or the Rights Issue, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. The Underwriters accordingly disclaim any responsibility and liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this announcement or any such statement.

Neither the content of Travis Perkins's website nor any website accessible by hyperlinks on Travis Perkins's website is incorporated in, or forms part of, this announcement.

This announcement contains certain forward-looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters. Statements in this announcement that are not historical facts are hereby identified as 'forward-looking statements' which can be identified by the use of forward-looking terminology, including the terms 'believes', 'estimates', 'plans', 'seek', 'projects', 'anticipates', 'continue', 'expects', 'intends', 'may', 'will', or 'should' or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements, including, without limitation, those relating to future business prospects, revenue, liquidity, capital needs, interest costs and income, in each case relating to the Group, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of the Group and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various important factors. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation: changes in general economic conditions in the UK and in the markets in which the Group operates (such as may be indicated by housing transactions, new housing and RMI output, the extent of unsold new housing inventory, house price inflation, mortgage and other interest rates, the availability of credit, unemployment, demographic trends, gross domestic product growth, the price of oil, metals, utilities and other commodities, consumer spending and consumer confidence); factors related to competitive conditions in the markets in which the Group operates; factors related to the Group's financing arrangements and indebtedness levels; factors related to the Group's ability to obtain its products from its suppliers; factors relating to the integrity of the Group's distribution centres; changes in commodity prices; factors related to the Group's IT functionality; exchange rate and interest rate fluctuations; retention of senior management; and factors related to bank counterparty default. No statement in this announcement is intended to be a profit forecast or to imply that the earnings of the Company for the current year or future years will necessarily match or exceed the historical or published earnings of the Company. These forward-looking statements speak only as at the date of this announcement. Except as required by the FSA, the London Stock Exchange, the Rules contained in Part VI of the FSMA or applicable law, the Company does not have any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, further events or otherwise, and the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this announcement might not occur. Recipients in Canada are advised that this announcement may contain future orientated financial information as such term is defined under Canadian securities laws and you should not place undue reliance on such information. The Company, the Joint Sponsors, the Underwriters and Tricorn Partners undertake no obligation and do not intend to revise or update any forward-looking statements in this announcement to reflect events or circumstances after the date of this announcement.

  Travis Perkins plc

Fully underwritten rights issue to raise approximately £300 million (net)

Introduction

The Board of Travis Perkins today announces a fully underwritten rights issue to raise gross proceeds of approximately £314 million (approximately £300 million net of expenses). The issue is being made on the basis of 7 New Shares for every 10 Existing Shares at an issue price of 365 pence per Ordinary Share. This represents a discount of approximately 38.5 per cent. to the theoretical ex-rights price and a 51.6 per cent. discount to the closing price of 753.5 pence per Ordinary Share on 8 May 2009, being the last business day before the announcement of the Rights Issue.

A Prospectus will be published and a Circular will be sent to Shareholders on or around 11 May 2009. The Prospectus will contain the expected timetable for the Rights Issue. Travis Perkins will seek approval from its shareholders in respect of the Rights Issue at an Extraordinary General Meeting expected to be held on 27 May 2009. The Rights Issue has been fully underwritten by the Underwriters.

The Directors are fully supportive of the Rights Issue and each intends, to the extent that he is able, either to take up his rights in full under the Rights Issue or to sell sufficient of his Nil Paid Rights during the nil paid dealing period to meet the costs of taking up the balance of his entitlements to New Shares under the Rights Issue.

Background to the Rights Issue

Travis Perkins is one of the UK's largest builders' merchant and home improvement retailers in terms of revenue and number of branches. The principal activities of the Group are the distribution and sale of a wide range of general building materials, timber, plumbing and heating products and the hiring of tools to professional builders and contractors and to the general public within the UK. the Group operates through a number of leading brands including the generalist builders' merchant Travis Perkins, the heavy builders' merchant Keyline Builders' Merchants, the specialist dry lining and insulation distributor CCF, the plumbing and heating products distributor City Plumbing Supplies, the kitchens and joinery business Benchmarx, the DIY retailer Wickes and the retail tile business Tile Giant. Additionally, the Group has a minority investment in ToolStation, a direct fixed price retailer of tools, fixings and hardware. The Group has strengthened and significantly grown its business both organically, with increases in market share in its core markets, and through the successful acquisition and integration of strategic businesses. In 2003, the Group generated revenues of £1.7 billion, which by 2008 had grown to £3.2 billion, representing a compound annual growth rate of approximately 13.6 per cent. over that period.

The weakening economic conditions which started in 2008 and have continued since then have negatively affected the Group's operating performance. During 2008, the Group sought to address the impact of the decline in its markets by taking a number of cost reducing and cash generating initiatives. These included:

(i)              significantly reducing headcount with like-for-like full time equivalent employee reductions during 2008 of 14 per cent. and 21 per cent. in its Merchanting business and Wickes, respectively, leading to an overall Group reduction of 16 per cent. Further restructuring actions were also implemented across the Group, including rationalisation of some senior management teams, elimination of one head office function, significant reductions in discretionary costs, postponement of development projects with longer-term benefits and rationalisation of the merchant division transport fleet. These actions, together with those taken in 2009, are expected to reduce costs in 2009 by approximately £50 million when compared to 2008;

(ii)            reducing capital expenditure in 2008 to £126 million, compared to £166 million in 2007, and significantly limiting expected 2009 capital expenditure to approximately £37 million, principally by scaling back of new branch expansion, investing in only essential capital projects and lengthening the replacement cycle for all asset classes;

(iii)           reducing working capital by £23 million in 2008 as compared to 2007; a further reduction of £20 million is targeted in 2009, as cash-generating initiatives are completed;

(iv)           suspension of the final dividend for 2008, resulting in an expected cash saving of approximately £35.5 million in 2009 as compared to 2008; and

(v)             renegotiating the Group’s syndicated credit facilities in April 2008 on what the Board believes are attractive terms.

In addition, the Group is pursuing a programme of active management of its property portfolio. From the Group's property portfolio, £49.5 million in cash and £28.7 million of profit have been generated over the last three years from 22 transactions involving 56 sites. As at 31 December 2008, the Group had 24 projects under development and the Board remains optimistic that in 2009 the Group will exceed the average annual cash raised from the property projects in the last three years.

The Board believes that there are strong long-term growth drivers for the Group's businesses, including a growing need for construction and housebuilding investment in the UK owing to demographic changes, population shifts and historical under-investment in new house building. A recent government forecast of the UK's housing needs has predicted that over the period from 2006 to 2013, the number of households in England is expected to grow by approximately 250,000 households per year, whereas in the last 15 years an average of fewer than 200,000 houses have been constructed in the UK each year. Over half the Group's revenue is derived from RMI work in domestic, commercial and public sector buildings. The Board believes that spending on RMI tends to be less volatile than new housing, since much of the work is non-discretionary in nature. The UK Government's requirement to reduce the carbon footprint of buildings and the Board's belief that owners of buildings will seek to upgrade existing buildings or homes rather than move to new ones in the current economic environment are both positive indicators for increased spending on RMI. In addition, increased government funding is expected to benefit publicly funded construction markets. The Board believes that due to the Group's leading positions in the UK's builders' merchant and DIY markets, the Group continues to be well placed to benefit from these trends.

In April 2008, the Group refinanced its UK bank debt facilities, securing a new committed £1 billion, five year syndicated credit facility expiring in 2013. The new syndicated credit facility comprises a fully drawn £525 million amortising term loan and a £475 million revolving credit facility, of which £305 million was undrawn as at 31 March 2009. The amortising term loan is due to be repaid in six £35 million tranches each half year, commencing April 2010, with the balance falling due in April 2013. The revolving credit facility is available to the Group until April 2013. Prevailing market conditions at the time of the refinancing in April 2008 resulted in the margin over LIBOR applied to the Group's borrowings under the new syndicated credit facility increasing significantly compared to the expiring facilities. Additionally, the Group incurred £14.7 million in facility arrangement fees, which are being amortised through finance charges over the period the facility is available.

In addition, the Group has in issue US$200 million of US PP Notes repayable in 2013 and a further US$200 million repayable in 2016. Through the use of cross-currency swaps the Group has eliminated its exposure to currency fluctuations and converted the fixed rate coupon to a variable rate.

The Group's syndicated credit facility and its US PP Notes contain financial covenants. The key financial covenants are the ratio of consolidated total net borrowings (adjusted net debt) to consolidated earnings before interest tax, depreciation and amortisation ('EBITDA') (each as defined in those covenants) which must not exceed 3.5:1, and the ratio of consolidated earnings before interest, tax and amortisation ('EBITA') to consolidated net interest ('interest cover') (each as defined in those covenants) which must not be less than 3.5:1. As at the 31 December 2008, the Group achieved an adjusted net debt to EBITDA ratio of 2.8:1 and an interest cover ratio of 4.3:1. The Group remains, and expects to remain, fully in compliance with its covenants. 

The Group also has access to a £40 million uncommitted overdraft facility.

The Board believes that in the context of current debt capital market conditions the Group's bank facilities and its US PP Notes are attractive both in terms of pricing and maturity.

As part of the Group's ongoing interest rate management policy, it terminated eight of its nine existing interest rate derivatives (hedging Sterling debt) during the first week of May 2009, which had a notional value of £578 million (with a range of maturities between 2010 and 2013), at a cost of £29 million, and entered into eight new derivative contracts commencing on 11 May 2009 for a two-year period with an initial notional value of £600 million. The Board believes this will reduce interest charges (with the effective interest rate on £600 million of debt reducing from approximately six per cent. to approximately three per cent.) included in the calculation of the Interest Cover Covenant by approximately £11 million in 2009.

Reasons for the Rights Issue

The Board has determined that it is appropriate for the Group to strengthen its balance sheet and overall financial position now, given continuing uncertain macro-economic conditions and the implications of this uncertainty for the Group's businesses. The Board believes that the Rights Issue would enable the Group to operate more effectively in current market conditions, create a stronger position from which it can grow and provide a platform from which it can take advantage of future recovery in its markets. Specifically, the Board believes the Rights Issue should enable the Group to:

(i)              Reduce the Group’s net debt and substantially increase financial headroom. The proceeds of the Rights Issue will reduce the Group’s net debt and reduce its annual interest charge. In addition, the Rights Issue will increase headroom under the Group’s financial covenants. This strengthening of the overall financial position of the Group should result in immediate and long-term benefits;

(ii)            Improve the Group’s trading position through the recession. The reduced net debt of the Group as a result of the Rights Issue should enable the Group to better withstand the economic downturn and compete more effectively in its markets;

(iii)           Increase the flexibility of the Group to operate and invest in its core businesses. Following the Rights Issue, the Group will have increased operating and strategic flexibility and the Board believes it will be able to maintain appropriate levels of investment in its businesses, increase capital expenditure from reduced levels and undertake projects that meet or exceed the Group’s minimum rate of return as and when appropriate. Such operational and strategic flexibility should enable the Group to maintain or improve the market positions of its businesses as well as to pursue attractive organic growth opportunities;

(iv)           Strengthen the Group’s competitive and strategic position to allow it to exploit the recovery potential in its markets and expand as conditions improve. The improved capital structure of the business should allow the Group to capitalise on attractive opportunities that might arise in its markets. For example, when appropriate market conditions return, the Group may seek to pursue selective bolt-on acquisitions, consistent with its existing multi-channel distribution strategy; and

(v)             Enhance the Group’s future access to, and lower the costs of, sources of capital. The Board believes that the reduced net debt of the Group as a result of the Rights Issue should enhance the Group’s future access to, and lower the costs of, sources of financing and widen the sources of capital available to the Group.

The Board expects that the Rights Issue should make a positive contribution to total earnings in the year to 31 December 2009 as a result of lower interest payments arising from lower average levels of financial indebtedness. The Board expects that the increased number of Shares in issue following the Rights Issue will, however, have a negative effect on the Group's earnings per share for the same period.

Use of proceeds

The Board intends to use the net proceeds of the Rights Issue, amounting to approximately £300 million, primarily to reduce borrowings under the Group's £475 million revolving credit facility.  To the extent the net proceeds exceed the amount paid down under the revolving credit facility, any balance of the net proceeds will be retained for general corporate purposes. The Group's revolving credit facility will remain available to be re-drawn. The Board believes that the Rights Issue will strengthen the Group's balance sheet and create a stronger position from which to develop the Group's business as macro-economic conditions improve.

Summary of the principal terms of the Rights Issue 

The Company is proposing to offer 85,903,379 New Shares by way of a Rights Issue. The New Shares will be offered to Qualifying Shareholders. The Rights Issue is expected to raise net proceeds of approximately £300 million. The Issue Price represents a 38.5 per cent. discount to the theoretical ex-rights price based on the Closing Price of 753.5 pence per Ordinary Share on 8 May 2009 (being the last business day before the announcement of the Rights Issue) and a 51.6 per cent. discount to the Closing Price of 753.5 pence per Ordinary Share on 8 May 2009 (being the last business day before the announcement of the Rights Issue).

The Rights Issue will be made on the basis of: 

7 New Shares at 365 pence per New Share for every 10 Existing Shares

held by Qualifying Shareholders at the close of business on the Record Date (being 22 May 2009). 

Entitlements to New Shares will be rounded down to the nearest whole number. The fractional entitlements not allotted to Shareholders will be aggregated and sold in the market for the benefit of the Company. Holdings of Existing Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. 

The Rights Issue is fully underwritten by the Underwriters. 

The Rights Issue will result in 85,903,379 New Shares being issued (representing approximately 70 per cent. of the existing issued share capital and 41.2 per cent. of the enlarged issued share capital immediately following completion of the Rights Issue on the assumption that no Ordinary Shares will be issued pursuant to the exercise of any options or awards under any Travis Perkins Employee Share Plans between the date of this announcement and the closing of the Rights Issue). 

The Rights Issue is conditional, inter alia, upon: 

(i)              the passing of the Resolutions at the Extraordinary General Meeting;

(ii)            the Underwriting Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms; and

(iii)           Admission becoming effective by not later than 8.00 a.m. on 28 May 2009 (or such later time and date as the Company and Joint Sponsors may agree).

The New Shares, when issued and fully paid, will rank pari passu in all respects with the existing issued Ordinary Shares including the right to receive dividends or distributions made, paid or declared after the date of their issue. 

Application will be made to the UK Listing Authority and to the London Stock Exchange for the New Shares to be admitted to the Official List and to trading on the London Stock Exchange's market for listed securities. It is expected that Admission will occur and that dealings in the New Shares (nil paid) on the London Stock Exchange will commence at 8.00 a.m. on 28 May 2009. 

Current trading and prospects

Overall, the Group has performed ahead of the Board's expectations in the first four months of 2009 in markets that have, as anticipated, continued the slowdown seen throughout 2008. 

Group revenue for the four months ended 30 April 2009 was down by 13.6 per cent. with like-for-like sales down 14.4 per cent., giving rise, as expected, to a reduction in the Group's profit before tax, compared to the same period in 2008.

Merchanting

For the four months ended 30 April 2009, Merchanting revenue declined by 18.4 per cent and on a like-for-like basis by 19.0 per cent. compared to the same period in 2008. The decline in like-for-like sales was evenly balanced between General and Specialist Merchanting. 

Merchanting's like-for-like sales in the months of March and April 2009 decreased by 18.4 per cent. over the same months in 2008, reflecting a continuation of like-for-like sales decline. 

Against competitive market conditions and continued high cost inflation, particularly on heavy building materials, Merchanting has been successful in limiting gross margin erosion and the Board believes it has also been successful in passing on the majority of product cost increases. The Board has chosen not to pursue low margin sales.

Retail

Revenue for Retail for the 18 week period ended 2 May 2009 declined by 1.9 per cent., with like-for-like sales declining by 3.6 per cent. on a delivered basis compared to the same period in 2008. Like-for-like sales for Retail on an ordered basis over the same period declined by 1.6 per cent.

Over this period, Wickes made significant gains in kitchen and bathroom revenue with like-for-like sales on a delivered basis up by 12.5 per cent. and on an ordered basis up by 22.8 per cent. over the same period of 2008. Wickes initiated a successful change in promotional strategy utilising television advertising instead of predominantly relying on paper based catalogues and advertising materials, which the Board believes enabled it to increase its revenue from sales of kitchen products in the early part of 2009 following the liquidation of a competitor. Like-for-like sales of Wickes' core products decreased by 6.5 per cent. over the same period of 2008. 

Wickes had a successful Easter period reflected by like-for-like sales improvement for March and April 2009 combined of 2.9 per cent. over the same months in 2008. Strong kitchen and bathroom revenue during the two month period improved Wickes' gross margin with a slight gain on the previous year.

Property

The Group has continued its programme of active management of its property portfolio and during the four months ended 30 April 2009 generated £2.6 million profit (£0.6 million cash received). In addition, the Group has exchanged contracts on transactions which will realise £2.2 million of profit upon receipt of planning consent and is in an advanced stage of negotiation in respect of transactions which would realise a profit of more than £7.5 million if completed.

Overhead costs

Overhead costs, comprising selling and distribution costs and administration expenses, were tightly controlled in the four months ended 30 April 2009, and cost reductions are running just ahead of the Group's targeted £50 million reduction of costs in 2009 when compared to 2008.

Net debt

The Group's net debt position at 31 March 2009 of £984.6 million improved ahead of the Board's expectations principally due to further improvements in inventory reduction and the performance of Wickes, as described above. 

Prospects

The Board expects the markets in which the Group operates to continue to weaken until at least the third quarter of 2009. The Board believes recent lead indicators relating to the housing market, such as mortgage approvals; housing transactions and house prices; consumer and customer confidence; and construction orders generally show signs of stabilisation. However the impact of any potential increases in unemployment on these markets and indicators is uncertain. The Board has continued to manage the business according to its current operational priorities, including cash maximisation and cost control, while maintaining the benefits of Group scale.

Extraordinary General Meeting

On or around 11 May 2009, Shareholders will be sent the Circular convening an Extraordinary General Meeting to be held at 11.00 a.m. on 27 May 2009 at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ. A Form of Proxy will be enclosed with the Circular. The Extraordinary General Meeting is being held for the purpose of considering and, if thought fit, passing the following three Resolutions: 

(i)         The first resolution is an ordinary resolution to increase the Company’s authorised, but unissued, share capital;

(ii)         The second, resolution conditional on the passing of the first Resolution above, is an ordinary resolution to grant the Directors authority to allot the New Shares for the purposes of the Rights Issue; and

(iii)        The third resolution, conditional on the passing of the second Resolution above, is a special resolution, to disapply the pre-emptive rights provisions of section 89 of the Companies Act in respect of the New Shares to be allotted pursuant to the second Resolution above.

To be effective, Forms of Proxy must be completed and received by the Registrars at Capita Registrars, Proxy Department, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by 11.00 a.m. on 25 May 2009.

Action to be taken

Further information on the Rights Issue and the procedure for acceptance and payment and the procedure in respect of rights not taken up will be set out in the Prospectus.

DEFINITIONS

Admission	the admission of the New Shares (nil paid and fully paid) to the Official List becoming effective in accordance with the Listing Rules and the admission of such shares (nil paid and fully paid) to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Admission and Disclosure Standards
Admission and Disclosure Standards	the 'Admission and Disclosure Standards' of the London Stock Exchange containing, among other things, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's main market for listed securities
Board	the Board of Directors of Travis Perkins
Circular	the circular to be sent to Shareholders incorporating the notice of Extraordinary General Meeting
Citi Company or Travis Perkins	Citigroup Global Markets Limited Travis Perkins plc, a company incorporated under the laws of England and Wales (registered under no. 824821), with its registered office at Lodge Way House, Lodge Way, Harlestone Road, Northampton NN5 7UG
CREST	the relevant system, as defined in the CREST Regulations (in respect of which Euroclear UK & Ireland Limited is the operator as defined in the CREST Regulations)
CREST Regulations or Regulations	the Uncertificated Securities Regulations 2001 (SI 2001 No. 01/378), as amended
Directors	the executive Directors and non-executive Directors of Travis Perkins
Existing Shares	the existing Ordinary Shares of the Company
Extraordinary General Meeting	the extraordinary general meeting of Travis Perkins to be held at 11:00 a.m. on 27 May 2009
Form of Proxy	form of proxy for use by Shareholders in relation to the Extraordinary General Meeting
FSA	the Financial Services Authority of the UK
FSMA	the Financial Services and Markets Act 2000, as amended
Fully Paid Rights	rights to acquire the New Shares, fully paid
HSBC	HSBC Bank plc
Joint Sponsors	Citi and HSBC
Listing Rules	the Listing Rules made by the FSA under Part VI of FSMA
London Business Day	a day (excluding Saturdays and Sundays or public holidays in England and Wales) on which banks generally are open in London for the transaction of normal business
London Stock Exchange	London Stock Exchange plc
New Shares	Ordinary Shares to be allotted and issued pursuant to the Rights Issue
Nil Paid Rights	rights to acquire the New Shares, nil paid
Non-CREST Shareholder	a Shareholder who does not hold their Ordinary Shares in CREST
Official List	the Official List of the FSA pursuant to Part VI of FSMA
Ordinary Shares or Shares	the ordinary shares of 10 pence each in the share capital of the Company (including, if the context requires, the New Shares)
pounds sterling or £	the lawful currency of the UK
Provisional Allotment Letter	the renounceable provisional allotment letter expected to be sent to Qualifying Non-CREST Shareholders in respect of the New Shares to be provisionally allotted to them pursuant to the Rights Issue
Qualifying CREST Shareholders	Qualifying Shareholders holding Ordinary Shares in uncertificated form in CREST
Qualifying Non-CREST Shareholders	Qualifying Shareholders holding Ordinary Shares in certificated form
Qualifying Shareholders	holders of Ordinary Shares on the register of members of the Company at the Record Date with the exclusion (subject to certain exceptions) of persons with a registered address or located or resident in the United States or an Excluded Territory
Record Date	close of business on 22 May 2009
Registrar(s)	the Registrars of the Company, Capita Registrars, at Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0GA. Telephone [phone] and email [e-mail]
Resolutions	the resolutions to be proposed at the Extraordinary General Meeting to implement the Rights Issue
Rights Issue	the proposed issue by way of rights of New Shares to Qualifying Shareholders
RMI	repair, maintenance and improvement
Shareholder or Travis Perkins Shareholder	a holder of Ordinary Shares
Travis Perkins Group or the Group	the Company and each of its subsidiaries and subsidiary undertakings from time to time
Tricorn Partners	Tricorn Partners LLP
UK	the United Kingdom of Great Britain and Northern Ireland
UK Listing Authority or UKLA	the FSA in its capacity as the competent authority for the purposes of Part VI of FSMA and in the exercise of its functions in respect of the admission to the Official List otherwise than in accordance with Part VI of FSMA
Underwriters	Citigroup Global Markets U.K. Equity Limited, HSBC, Barclays Bank PLC, BNP Paribas and RBS Hoare Govett Limited
Underwriting Agreement	the underwriting agreement dated 11 May 2009 between the Company, the Underwriters and the Joint Sponsors relating to the Rights Issue
United States or US	the United States of America, its territories and possessions, any state of the United States and the District of Columbia
US PP Note Purchase Agreement	the note purchase agreement dated 26 January 2006 under which Travis Perkins agreed to the issue and sale of (i) US$200,000,000 aggregate principal amount of its 5.77 per cent. Guaranteed Series A Senior Notes due 26 January 2013 and (ii) US$200,000,000 aggregate principal amount of its 5.89 per cent. Guaranteed Series B Senior Notes due 26 January 2016, and further described in the Prospectus
US PP Notes	the US$400 million fixed rate guaranteed unsecured private placement notes issued by the Company in January 2006 pursuant to the terms of the US PP Note Purchase Agreement, and further described in the Prospectus

 

END

 

 

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