REG-Travis Perkins PLC : Annual Financial Report <Origin Href="QuoteRef">TPK.L</Origin> - Part 1
25/04/2016 16:05
ANNUAL REPORT 2015
Publication of the Annual Report
25 April 2016
Travis Perkins plc (the "Company") announces that its Annual Report for the
year ended 31 December 2015, and the Notice of Annual General Meeting, are now
available on the Company's website - www.travisperkinsplc.com.
Printed copies of these documents will be posted to shareholders on 26 April
2016 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. It should be read in conjunction with the Company's preliminary
announcement issued on 3 March 2016. Together these constitute the material
required by rule 6.3.5 of the Disclosure and Transparency Rules to be
communicated to the media in unedited full text. This material is not a
substitute for reading the full Annual Report. Page and note references in
the text below refer to page and note numbers in the Annual Report.
Statement of Principal Risks and Uncertainties
Related Party Transactions
Statement of Directors Responsibilities
The Company published its preliminary results on 3 March 2016.
On behalf of the Board:
John Carter - Chief Executive Officer
Tony Buffin - Chief Financial Officer
The Annual General Meeting of the Company will take place at 12.00 noon on
Wednesday 25 May 2016 at Northampton Rugby Football Club, Franklin's Gardens,
Weedon Road, Northampton NN5 5BG.
Enquiries:
John Carter, Chief Executive Officer
Tony Buffin, Group Financial Officer
Graeme Barnes, Head of Investor Relations
Travis Perkins plc | +44 1604 683 222 | +44 7469 401 819|
investor.relations@travisperkins.co.uk
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
For the year ended 31 December 2015
The Group operates in markets and an industry which by their nature are
subject to a number of inherent gross risks. The Group is able to mitigate
those risks by adopting different strategies and by maintaining a strong
system of internal control. However, regardless of the approach that is taken,
the Group has to accept a certain level of risk in order to generate suitable
returns for shareholders and for that reason the risk management process is
closely aligned to the Group's strategy.
The Board has a risk reporting framework that ensures it has visibility of
the Group's key risks, the potential impacts on the Group and how and to what
extent those risks are mitigated. As part of its risk management process, the
principal risks stated in the Group's risk register are reviewed, challenged
and updated by the Board and monitored throughout the year. Each operating
business within the Group monitors a separate risk register. This risk
register is used to determine strategies adopted by the Group's various
businesses to mitigate the identified risks and are embedded in their
operating plans.
Details of the Group's risk management processes are given in the Corporate
Governance report on page 102. The risk environment in which the Group
operates does not remain static. The nature of risk is that its scope and
potential impact will change over time. As such the list below should not be
regarded as a comprehensive statement of all potential risks and uncertainties
that may manifest themselves in the future. Additional risks and uncertainties
that are not presently known to the Directors, or which they currently deem
immaterial, could also have an adverse effect on the Group's future operating
results, financial condition or prospects.
The table below sets out, in no particular order, the current principal risks
that are considered by the Board to be material, their potential impacts and
the factors that mitigate them. The inherent risk (before the operation of
control) is stated for each risk area together with an indication of the
current trend for that risk.
Inherent Risk, Level and Trend Risk Description Impact Risk Mitigation
Market conditions Inherent Risk: High Trend: Static The Group's products are sold to businesses, tradesmen and retail customers for a broad range of end uses in the built environment. The Group's markets are cyclical in nature and the performance of those markets is affected by general economic conditions and a number of specific drivers of construction, RMI and DIY activity, including mortgage availability and affordability, housing transactions and the timing and nature of government activity to stimulate activity, net disposable income, house price inflation, consumer confidence, interest rates and unemployment. A significant downturn in economic conditions or alternatively major uncertainty about the future outlook could affect the Group's markets, levels of construction activity and the confidence levels of the Group's customers, which could reduce their propensity to purchase products and services from the Group's businesses. Adverse effect on financial results The Board conducts an annual review of strategy, which includes an assessment of likely competitor activity, market forecasts
and possible future trends in products, channels of distribution and customer behaviour. The Group maintains a comprehensive
tracking system for lead indicators that influence the market for the consumption of building materials in the UK. Significant
events including those in the supply chain that may affect the Group are monitored by the Executive Committee and reported to
the Board monthly by the Group CEO. Should market conditions deteriorate then the Board has a range of options dependent upon
the severity of the change. Historically these have included amending the Group's trading stance, cost reduction, lowering
capital investment and cutting the dividend.
Competitive pressures place pressure on prices, margins and profitability Inherent Risk: High Trend: Static Market trends, particularly in respect of customers' preferences for purchasing materials through a range of supply channels and not just through the Group's traditional competitors may affect the Group's performance so making traditional branch based operations less relevant or profitable. Increased price transparency could cause customers to perceive that the Group is less competitive than some other competitors. Public sector buying groups could reduce sales if public bodies chose to buy direct from manufacturers. Disintermediation may become more of a threat if manufacturers decide to deal directly with end users. The Group faces the risk of new entrants to any of its markets, including from businesses currently operating outside its industry or only in overseas markets. Adverse effect on financial results. Changes to market practice are tracked on an on-going basis and reported to the Board each month. The Group is building multi
-channel capabilities that complement its existing operations and provide its customers with the opportunity to transact with
the Group through channels that best suit their needs. Pricing strategies across the Group are regularly reviewed and where
necessary refined to ensure they remain competitive. The development of new, innovative and competitive supply solutions is a
key strength of the Group. It works closely with customers and suppliers on a programme of continuous improvement designed to
improve its customer proposition. The Group's strategy allows it to use sites flexibly. Alternative space utilisation models
are possible, including maintaining smaller stores and implanting additional services into existing branches.
Information technology capabilities impact the Group's ability to trade profitably Inherent Risk: Medium Trend: Increasing The Group depends on a wide range of complex IT systems, both in terms of the availability of hardware and the efficient and effective operation of software. The rapid expansion of the Group together with an increasing demand for IT services, particularly as the Group embraces modern platforms such as multi-channel, updates its point of sale systems and develops its supply chain capabilities, could result in development programmes being delayed or new IT systems and change management systems not being successfully implemented. Should a system become unavailable for an extended period either through deliberate act or through accidental failure it could impact the business' ability to trade. Incidents of sophisticated cyber-crime represent a significant and increasing threat to all businesses including the Group. A major breach of system security could result in disruption to systems and / or the theft and misuse of confidential data with consequential impacts on the Group's reputation or ability to trade. Adverse effect on financial results. Adverse effect on the Company's reputation. The strategic demands of the business, the resources available to IT, the performance levels of key systems and IT security are
kept under review by the Executive Committee. Plans that require continual investment in the IT infrastructure have been
approved and are being implemented. Maintenance is undertaken on an on-going basis to ensure the resilience of group systems,
with escalation procedures operating to ensure any performance issues are resolved at an early stage. The Group's two data
centres mirror each other with data processing capable of being switched from one site to the other. An IT disaster recovery
plan exists together with a business continuity plan. Arrangements are in place for alternative data sites for both trade and
consumer businesses. Off-site back-up routines are in place. The Group has a data security committee responsible for
monitoring and maintaining cyber security. In addition a programme of risk oriented reviews is undertaken to ensure the level
of control around IT systems remains robust. The Group has reacted to the increasing cyber threat by increasing the size of its
team to deliver a comprehensive security architecture. Investments in best of breed solutions have been made that continually
adapt to mitigate the risk associated with the most advanced threats. Furthermore, the Information Security team has the full
support of senior management acting as an important gateway to ensure the development of new systems is performed according to
industry standard security practices.
Colleague recruitment, retention and succession plans do not deliver the required skills and experience Inherent Risk: Low Trend: Static The ability to recruit, retain and motivate suitably qualified staff is an important driver of the Group's overall performance. The strength of the Group's customer proposition is underpinned by the quality of people working throughout the Group. Many of them have worked for Travis Perkins for some considerable time, during which they have gained valuable knowledge and expertise. The Group faces competition for the best people from other organisations. Ensuring the retention, proper development of employees and the succession for key positions is important if the Group is not to suffer an adverse effect on future prospects. Inability to develop and execute development and succession plans. Competitive disadvantage. The Group's employment policies and practices are kept under regular review. Staff engagement and turnover by job type is
reported to the Executive Committee regularly and to the Board. Succession plans are established for the most senior positions
within the Group and these are reviewed annually. The Group's reward and recognition systems are actively managed to ensure high
levels of employee engagement. A wide-range of training programmes are in place to encourage staff development, whilst
management development programmes are available to those identified for more senior positions. Salaries and other benefits are
benchmarked regularly to ensure that the Group remains competitive and the Group operates incentive structures to ensure that
high performing colleagues are adequately rewarded and retained.
Supplier dependency could result in shortages of product Inherent Risk: Medium Trend: Static The Group is the largest customer to many of its suppliers. In some cases, those suppliers are large enough to cause significant supply difficulties to the Group if they are unable to meet their supply obligations due to either economic or operational factors. Alternative sourcing may be available, but the volumes required and the time it may take those suppliers to increase production could result in significant stock-outs for some considerable time. The Group has become more reliant on overseas factories producing products as the Group has rapidly expanded its direct sourcing capabilities. This has increased the Group's exposure to sourcing, quality, trading, warranty and currency issues. There is a potential for European anti-dumping legislation to be extended to encompass further Asian countries which could increase the cost of some imported products. Adverse effect on financial results. Adverse effect on reputation. The commercial and financial teams have established strong relationships with the Group's key suppliers and work closely with
them to ensure the continuity of quality materials. To spread the risk where possible contracts exist with more than one
supplier for key products. The Group has made a significant investment in its Far East infrastructure to support its direct
sourcing operation which allows the development of own brand products, thereby reducing the reliance on branded suppliers.
- More to follow, for following part double click ID:nHUG3dgqNbRecent news on Travis Perkins
See all newsREG - Travis Perkins PLC - Director Declaration
AnnouncementREG - Travis Perkins PLC - Travis Perkins plc - confirmed CEO appointment
AnnouncementREG - Travis Perkins PLC - Confirmation of Redemption and Cancellation
AnnouncementREG - Travis Perkins PLC - Notice of Redemption and Cancellation of Listing
AnnouncementREG - Travis Perkins PLC - TR1 Notification of Major Holdings
Announcement