REG-Travis Perkins Travis Perkins: Successfully adapted to unprecedented markets
08/09/2020 07:00
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Travis Perkins (TPK)
Travis Perkins: Successfully adapted to unprecedented markets
08-Sep-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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Travis Perkins plc
Interim results for the six months ended 30 June 2020
Successfully adapted to unprecedented markets
£m (unless otherwise stated) Note HY 2020 HY 2019 Change
Revenue 2,781 3,484 (20.2)%
Like-for-like revenue growth(1) (19.3)% 5.3% (24.6)ppt
Adjusted operating profit(1) 20a 42 220 (80.9)%
Adjusted earnings per share(1) 11b 1.4p 56.5p (97.5)%
ROCE(1) 20f 6.4% 10.0% (3.6)ppt
Covenant net debt(1) 15 22 414 (392)
Dividend per share 12 - 15.5p
Operating (loss) / profit (92) 62
Total (loss) / profit after tax (113) 12
Basic (loss) / earnings per share 11a (45.7)p 4.2p
(1) Alternative performance measures are used to provide a guide to underlying performance. Details of calculations
can be found in the notes listed
Financial highlights
• Fall in revenue of 20% demonstrated resilience despite the impact of the pandemic, with continuing recovery as
lockdown measures eased
• Adjusted operating profit of £42m reflecting shortfall from lower volumes partially offset by actions to reduce
and control operating costs
• Restructuring programme underway to reduce overheads in line with the anticipated volume outlook, delivering cost
savings of £120m on an annualised basis
• Net adjusting items of £129m, primarily relating to the restructuring programme
• Strong focus on cash and working capital management driving reduction of covenant net debt of £322m from 31
December 2019 to £22m
Strategic and operational progress
• Rapidly adapted the business model to ensure safety and deliver outstanding customer service throughout the
pandemic
• Accelerated elements of the strategic plan across digital enablement, customer fulfilment, process simplification
and branch network
• Significant improvements in digital platforms across all segments underpinning market outperformance and
supporting future growth
• Demerger of Wickes paused until markets become more stable and predictable
Nick Roberts, Chief Executive Officer, commented:
"Throughout the pandemic, the health and safety of our colleagues and customers has been our primary concern. Customer
interactions have changed significantly resulting in changes to the way we do business, from increased activity
through digital channels through to alterations to our physical store formats in order to maintain safe working
practices.
Although our financial performance in the first half of 2020 was impacted by the Covid-19 pandemic, and we have had to
undertake a restructuring programme in light of the challenging outlook for the Group's end markets, we have made
significant strategic and operational progress against the four strategic priorities we outlined at our full year
results in March 2020.
Although considerable uncertainty around the impact of the COVID-19 pandemic remains, the actions we have taken to
adapt and innovate in our businesses mean that the Group is well placed to continue to service our customers, support
our colleagues, outperform our markets and generate value for our shareholders."
Enquiries:
Travis Perkins Powerscourt
Graeme Barnes Justin Griffiths / James White
+44 (0) 7469 401819 +44 (0) 207 2501446
graeme.barnes@travisperkins.co.uk travisperkins@powerscourt-group.com
Heinrich Richter
+44 (0) 7392 125417
heinrich.richter2@travisperkins.co.uk
Interim results presentation:
Management are hosting a virtual results presentation at 9.30am. Please register at the following link:
1 https://www.investis-live.com/travis-perkins/5f437c906fbfa21200605076/ylsc
American depositary receipts
Travis Perkins American depositary receipts are traded in the US on the OTC Pink market: (OTC Pink: TPRKY).
Cautionary Statement:
This announcement contains "forward-looking statements" with respect to Travis Perkins' financial condition, results
of operations and business and details of plans and objectives in respect to these items. Forward-looking statements
are sometimes, but not always, identified by their use of a date in the future or such words as "anticipates", "aims",
"due", "could", "may", "will", "should", "expects", "believes", "seeks", "intends", "plans", "potential", "reasonably
possible", "targets", "goal" or "estimates", and words of similar meaning. By their very nature forward-looking
statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events
and depend on circumstances that will occur in the future. There are a number of factors that could cause actual
results and developments to differ materially from those expressed or implied by these forward-looking statements.
These factors include, but are not limited to, the Principal Risks and Uncertainties disclosed in the Group's Annual
Report and as updated in this statement, changes in the economies and markets in which the Group operates; changes in
the legislative, regulatory and competition frameworks in which the Group operates; changes in the capital markets
from which the Group raises finance; the impact of legal or other proceedings against or which affect the Group; and
changes in interest and exchange rates. All forward-looking statements, made in this announcement or made
subsequently, which are attributable to Travis Perkins or any other member of the Group or persons acting on their
behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the
forward-looking statements in this document will be realised. Subject to compliance with applicable law and
regulations, Travis Perkins does not intend to update these forward-looking statements and does not undertake any
obligation to do so. Nothing in this document should be regarded as a profits forecast.
Without prejudice to the above:
(a) neither Travis Perkins plc nor any other member of the Group, nor persons acting on their behalf shall otherwise
have any liability whatsoever for loss howsoever arising, directly or indirectly, from the use of the information
contained within this announcement; and
(b) neither Travis Perkins plc nor any other member of the Group, nor persons acting on their behalf makes any
representation or warranty, express or implied, as to the accuracy or completeness of the information contained within
this announcement.
This announcement is current as of 8 September 2020, the date on which it is given. This announcement has not been and
will not be updated to reflect any changes since that date.
Past performance of the shares of Travis Perkins plc cannot be relied upon as a guide to the future performance of the
shares of Travis Perkins plc.
Summary
The Group's performance in the first half of 2020 was significantly impacted by the Covid-19 pandemic. While financial
performance was as a consequence materially below H1 2019, the Group has significantly strengthened its core and found
new ways to deliver excellent service to both its trade and retail customers.
Financial Performance
The Group made an encouraging start to 2020 with revenue growth of 2.4% in the 11 weeks to 18 March. However, as the
impact of the pandemic spread to the UK and the lockdown period was implemented, overall revenue in the half declined
by 20% to £2,781m and by 19% on a like-for-like basis.
Given the largely fixed cost base in the business, the revenue decline had a significant impact on Group
profitability, resulting in an adjusted operating profit of £42m (H1 2019: £220m). In the first half, as a direct
result of the challenging trading conditions, the Group recognised higher provisions in relation to holiday pay, slow
moving stock, rebates, and timing of customer credit account settlement, up to £20m of which may be recovered if the
recovery in trading continues through the second half of the year.
Taking into account £129m of adjusting items (principally resulting from the business restructuring actions announced
in June 2020), the Group delivered a statutory operating loss of £92m (H1 2019: operating profit of £62m).
Adjusted earnings per share fell to 1.4p per share (2019: 56.5p per share). Basic EPS fell to a 45.7p per share loss,
with the difference primarily driven by the costs of the restructuring programme.
Cash generation throughout H1 2020 was extremely strong, reflecting the Group's focus on liquidity management
throughout the Covid-19 crisis. Through strong and careful management of working capital, particularly the receipt of
debtor balances from customers and utilisation of inventory across the Group, the Group's covenant net debt position
fell by £322m in the half, to £22m. At 31 August 2020 the Group had £551m of cash on deposit, giving overall liquidity
headroom of £951m. The Group has a supportive bank lending group and prudently negotiated a relaxation of covenant
tests at both June and December 2020.
Given the ongoing level of uncertainty in the UK economy and the Group's end markets, the Board is not announcing an
interim dividend for 2020.
Response to the COVID-19 pandemic
Throughout the pandemic, the health and safety of our colleagues, customers and suppliers has been our primary
concern. In the early weeks of lockdown, the Group concentrated on supporting essential services to keep the nation's
critical infrastructure maintained and operational and to keep the UK's homes dry, warm and safe. The Group has
continued to work with its customers and suppliers as well as government and trade bodies to set standards to maintain
safe working practices and to support the recovery in construction.
From late March 2020, at the onset of the lockdown period, the Group ran a "service-light" operating model, focusing
on serving customers through remote, non-contact channels. Around a third of Merchanting branches were open, while
Wickes and Toolstation leveraged their strong digital capabilities to operate the majority of their branch networks as
fulfilment centres for digitally enabled transactions, either for direct delivery, or for click & collect within
designated time slots.
Through May and June, more of the Group's Merchant network returned to operation to support the early recovery of UK
construction activity. In late May, Wickes and Toolstation began, under strict safety guidelines, to welcome customers
back into stores, with a corresponding step up in DIY activity supporting the Group's overall performance.
The Group's end markets have continued to recover, with particular strength in DIY markets, but a slower return to
activity in new housebuilding and major commercial projects.
In order to partially mitigate the impact of reduced volumes, the Group managed its cost base tightly in the period
and appropriately used government assistance from the Coronavirus Job Retention Scheme and Business Rates Relief
arrangements. In the first half of the year, the Group has benefited from around £45m of furlough support, with very
few colleagues remaining on furlough beyond the end of June. The overall benefit of Business Rates Relief across the
12 months of the scheme is expected to be around £80m, with 75% to be realised in 2020, including around £20m in the
first half of the year.
In addition, a decision was taken, and announced internally on 7 April 2020, by the Board of Directors and the Group
Leadership Team to reduce their salaries by 20% effective from 1 May for a period of three months.
Business restructuring
On 15 June 2020, and reflecting the challenging outlook for the Group's end markets, a programme of restructuring was
announced, resulting in the planned closure of 165 branches, primarily across the trade merchant businesses. In the
main, these branches were closed by the end of June with the remainder closed by the beginning of August. Combined
with a streamlining of above-branch central support functions, the number of roles which will be reduced is around
2,500, equivalent to 9% of the workforce.
In the Travis Perkins general merchant, branch closures targeted smaller, subscale branches where either there are
difficulties in operating safe, social distancing practices, or where the scale of the branch means that profitability
is difficult in a lower volume environment. Since December 2018 the Group has embarked on a strategy to reduce the
number of branches, particularly around large UK conurbations, in order to operate from fewer, larger branches with
greater breadth and depth of product range. This restructuring activity accelerates the closure of suboptimal branches
in these areas.
In the specialist merchants, customer activity is more weighted towards delivery of products to customers, either from
branches or direct from suppliers. Fewer customer visits to branches reduces the requirement for 'nearby convenience',
and branch networks have been rationalised to ensure an even spread of delivery capability across the UK, with
right-sized branches in the right locations to service customers efficiently.
In Plumbing & Heating, a number of lower performing branches were closed, together with a reduction in headcount
across the business to reflect lower anticipated volumes in the short to medium term.
These restructuring actions are expected to deliver operating cost savings of approximately £120m on an annualised
basis, with the vast majority of actions completed by the end of August 2020. An adjusting item of £111m has been
recognised in H1 2020 covering the cost of accessing these savings. The cash cost is likely to be around £85m, with
approximately £35m to be paid in 2020. The remainder, associated with leasehold property, will be paid in future
years, although this is expected to be largely offset by the sale of freehold sites closed as part of the
restructuring.
Strategic and operational progress
At a Capital Markets event in December 2018, the Group laid out its plans for the years ahead, with two overarching
strategic aims being (i) to focus on best serving trade customers, and (ii) to simplify the business to increase
agility, speed up decision making and enable a leaner cost base.
In March 2020, four key strategic priorities were identified towards achieving these goals:
• Successful demerger of the Wickes business
• Regeneration of the Travis Perkins general merchant
• Acceleration of the expansion of the Toolstation business, in the UK and overseas
• Deliver an organisational platform fit for the future.
The regeneration of the Travis Perkins general merchant, growth of Toolstation, and development of an optimised
organisational platform form the basis of "strengthening the core" of the Group's businesses, focusing on getting the
fundamentals right to deliver outstanding customer service in a consistent and efficient way.
Strengthening the core
The Covid-19 pandemic has acted as a catalyst for changes across the operations of the Group, and has seen the Group
move to accelerate some of the strategic actions set out at the full-year 2019 results in March. A number of strategic
initiatives, previously planned to take place over a two year period, have been achieved in a matter of months as the
Group has moved at pace to better position the businesses for the future.
These advances can be grouped as follows:
Digital enablement
Customer interactions changed significantly through the lockdown period, and during the recovery phase. Forced to move
to a more remote transaction structure, customers looked for digital solutions to interact, which drove an immediate
focus on the Merchant businesses' digital transaction capabilities. Over the course of five weeks, the transactional
web platform for the Travis Perkins general merchant was rebuilt, with significant improvements in information on
product availability for collection or delivery, enabling a significant rise in web-based transactions.
Further progress was also made in the trade businesses on digitising the customer relationship, from initial product
research to account management, allowing customers to manage proof of delivery notices, invoices and credit account
payments all through an online portal. A customer app is under trial allowing this to all take place through a
smartphone.
In Toolstation, the balance of trading also shifted, with click & collect transactions increasing from around 10% to
around 90%. Branches adapted quickly, moving to a "timeslot drive-through model" which worked successfully with
customers. The IT infrastructure of Toolstation was also re-platformed to be scalable and more resilient as the
business grows. This pulled forward months of development, and has left the business in a considerably stronger
position.
Wickes demonstrated the success of its investments in recent years to fully embed its strong digital capabilities at
the heart of its operations, with stores expanding their established roles as fulfilment centres driving click &
collect sales up over 1,000%. Since reopening to customers, the online-in-store capability has given customers access
to the full range of Wickes products, whether transacting in store or online. A move to virtual customer meetings was
also made to support the reopening of the Kitchen & Bathroom showroom business.
In addition to the delivery of digital solutions, the Group has begun to plan the phased, lower risk approach to IT
upgrades, beginning with master data and core financial systems.
Customer fulfilment
The change in operations has also impacted colleagues in branch, with a higher proportion of orders being delivered,
with TP experiencing an increase of around 10ppts, with two thirds of product being delivered, and a similar trend
across the specialist merchants. In branch, a far greater degree of stock picking is being carried out by colleagues,
and a colleague app is under test which will streamline branch processes to reduce workload, and provide greater data
accuracy around stock.
In Toolstation UK, one of the branch fulfilment warehouses was converted in a matter of days to be able also to pack
parcels for direct customer delivery. Whilst the branch expansion programme was temporarily halted throughout the
lockdown period it has now resumed in earnest, with 19 branches opened in July and August, and the business on course
to achieve the planned 60 openings in 2020.
Process simplification
Across the Group the focus on cash and liquidity enabled conversations with suppliers around the netting of standard
pricing rebates, moving away from gross settlement of invoices and corresponding rebate payments. Along with improving
near term liquidity metrics, this also allows a clearer view of product costing to be shared with branch teams which
is enabling branch colleagues to make better informed decisions around pricing.
The Merchant businesses have further simplified pricing templates reducing the number of alternatives to provide
greater consistency for customers, including more relevant shelf-edge pricing on lightside products, thus making it
easier and simpler for branch colleagues to serve customers.
Estate
As mentioned above, as part of the restructuring programme, the merchant businesses have rationalised their branch
estates to focus operations from right-sized branches in optimised locations to service customers efficiently.
Strategic portfolio actions
While the Group placed on hold the plans to dispose of the Plumbing & Heating business in September 2019 due to Brexit
uncertainty, it took the opportunity to dispose of the low margin PF&P wholesale activity in January 2020. It remains
the intention of the Board to sell the P&H business, whilst in the short term continuing to drive operational
improvements to improve returns further and to optimise value for shareholders.
On 20 March, the Group announced that it had placed the demerger of Wickes on hold in order to focus on managing
through the pandemic and to maximise liquidity across the Group. The Board continues to believe the demerger of Wickes
will allow both businesses to fulfil their potential and will pursue it when market conditions are more settled and
will update the market in due course.
Dividend
At the end of March, the Board took the prudent decision to suspend the 2019 Final Ordinary dividend that was due to
be paid to shareholders in May 2020. This action helped to protect the Group's near-term liquidity position through a
period of extreme uncertainty and market volatility. While the Group's liquidity position remains strong, the Board
acknowledges that a significant level of economic and market uncertainty remains in the short term. Therefore, in
order to maintain the strong liquidity position, the Board deems it appropriate for dividend distributions to
shareholders to remain suspended at this time.
The Board recognises the importance of dividends to shareholders and so will keep this position under review, taking
into consideration the trading environment in the Group's end markets and the on-going liquidity position. A further
update will be provided as and when it is appropriate to do so.
Outlook
The long term fundamentals of the Group's end markets remain robust, with ongoing demand for new housing and
underinvestment in the repair, maintenance and improvement of the existing UK housing stock, however, significant
uncertainty remains in the UK economy in the near term.
The Group welcomes Government stimulus for the UK construction sector as it recovers from the COVID-19 crisis, with
commitments regarding infrastructure investment, green home improvement schemes and SDLT reductions. There has been a
recent strong recovery in secondary housing transactions, but it is not yet clear whether this is a sustained trend or
a release of pent up demand. Furthermore, it is likely that an increase in unemployment will have a detrimental impact
on consumer confidence, and hence the Group remains cautious on the volume outlook for building materials in the near
term.
Group like-for-like sales trends in July and August have returned to close to prior year levels which is supported by
domestic RMI and current strong trading in consumer DIY markets. The Group has demonstrated significant agility across
all its activities in the first half of the year, taking actions to strengthen its core businesses and leaving it well
placed to continue to outperform its markets and generate value for shareholders.
Technical guidance
The Group's technical guidance for 2020 is as follows:
• Effective tax rate of 22%
• Finance charges similar to 2019
• Capital expenditure in 2020 of around £70m to £80m
• Property profits of around £10m
Segmental performance
Merchanting
H1 2020 H1 2019 Change
Total revenue £1,385m £1,869m (25.9)%
Like-for-like growth (25.8)% 6.4% (32.2)ppt
Adjusted operating profit* £35m £140m (75.0)%
Adjusted operating margin 2.5% 7.5% (500)bps
ROCE 9% 12% (3)ppt
Branch network** 848 984 (136)
*Segmental adjusted operating profit figures are presented excluding property profits
**2019 branch network figures for comparison are taken at 31 December 2019
Trade merchanting sales were severely impacted by the lockdown period, with around a third of branches open during the
end of March and April as the business pivoted to focus on essential projects only, including support to build the
network of Nightingale Hospitals. Branches progressively re-opened from late-April onwards to support the steady
recovery in construction end markets. The recovery has been strongest in domestic RMI markets, with the Travis Perkins
general merchant recovering most quickly, and the specialist merchants, with a greater exposure to new housebuilding
and commercial construction, lagging as customers ramp up more slowly.
During the crisis, all of the Merchant businesses moved to call & collect models, with solutions quickly developed to
also offer a click & collect service. This has proven successful across a full range of customers from large to small,
with the solutions implemented set to be firmly established on an ongoing basis.
Across the Merchanting segment gross margins have reduced modestly in the period, reflecting a reduction in annual
volume rebate expectations from suppliers and the mix of business shifting more towards heavyside materials. The cost
of operating both branch and distribution networks has also been proportionally higher because of the lower efficiency
from running on a socially distanced basis.
There has been a shift in sales in the first half, with a higher degree of delivered sales across all businesses. A
shift to a greater proportion of heavyside sales in Travis Perkins was partially offset by a higher proportion of yard
sales, at typically higher margins than direct sales, in Keyline.
While operating costs in the Merchanting segment were reduced in the half by around £50m year-on-year, the high fixed
cost nature of the merchant business model drove a significant reduction in operating margin. Lower absolute operating
costs were supported by the use of the Coronavirus Job Retention Scheme to furlough staff during the lockdown period
when two thirds of the network was closed as well as cost savings made across the supply chain, including the benefits
of simplifying product supply from more local sources.
In addition to the short-term Covid response actions, as part of the restructuring plans announced in June 2020, 140
Merchanting branches were closed by the end of June. These closures, together with the restructuring of sales and
above-branch support teams are expected to generate around £90m of annualised cost savings.
Throughout the COVID-19 pandemic, the Merchant businesses have had a clear focus on cash, in particular the recovery
of monies due from credit customers throughout the lockdown period. A successful collaboration between the credit,
sales and branch teams to leverage the businesses' strong customer relationships, combined with careful management of
inventory and close control of material purchases has driven an excellent cash performance across Merchanting in the
half.
Toolstation
H1 2020 H1 2019 Change
Total revenue £285m £208m 37.0%
Like-for-like growth 12.9% 17.3% (4.4)ppt
Adjusted operating profit* £1m £13m (92.3)%
Adjusted operating margin 0.4% 6.3% (590)bps
ROCE 4% 10% (6)ppt
Branch network (UK)** 409 400 9
Branch network (Europe)** 74 66 8
Memo:
Adjusted operating profit - UK £10m £13m (23.1)%
*Segmental adjusted operating profit figures are presented excluding property profits
**2019 branch network figures for comparison are taken at 31 December 2019
Toolstation revenues increased by 37% in the half, including the consolidation of Toolstation Europe following the
acquisition in Q4 2019. Like-for-like growth in Toolstation UK of 12.9% was a strong performance considering the level
of disruption from the lockdown in late March and April.
In the UK, branches were closed on 24 March, before reopening as click & collect fulfilment centres. The multi-channel
capability of the business was demonstrated as volumes grew, with 90% of transactions being carried out through the
website and collected in branches or delivered to site. In order to cope with the significant increase in volume the
website was rebuilt in a matter of days, before the wider IT infrastructure of the business was then replatformed over
following weeks in order to be scalable and more resilient as the business grows.
The pivot to digital trading required a significant increase in direct-to-customer deliveries, and to satisfy this
demand the Redditch distribution centre was successfully repurposed from store replenishment to customer fulfilment.
The costs involved in adapting and running the distribution network on a socially distanced basis, as well as the
higher proportion of delivered sales and the costs to make the necessary improvements to the business's digital
capabilities, increased the operating costs of the business in the first half of the year, offsetting the growth in
gross profit generation in the UK in the first half of the year.
Although the network expansion programme was paused between March and June as fitters could not access sites, nine new
branches were opened in the first half. The opening programme restarted in July, with the UK business continuing to
plan to open 60 new branches in 2020 in total. New format branches continue to be trialled, particularly following the
success of the enforced "Drive Through" model of click & collect service developed during lockdown.
In Europe, the lockdown impacted the business earlier than in the UK, but with the result of reopening also coming
sooner. It is apparent that Toolstation's proposition, particularly its multichannel model and digital capability to
service customers, combined with reliable stock availability, has proven popular with tradespeople in the Netherlands,
Belgium and France, with significant sales growth in the half. Total sales in the Netherlands and Belgium grew by 79%,
and by 56% on a LFL basis. In France, total sales grew by 74%, and by 61% on a LFL basis. Although the branch network
expansion is behind plan, eight new branches were opened in Europe in H1 with further openings in Benelux and France
planned for the second half.
As disclosed previously, the additional operating costs of the European business will lead to the consolidation of
around a £20m loss for 2020, of which £9m was recognised in the first half of the year.
Retail
H1 2020 H1 2019 Change
Total revenue £636m £695m (8.5)%
Like-for-like growth (8.2)% 9.7% (17.9)ppt
Adjusted operating profit* £32m £52m (38.5)%
Adjusted operating margin 5.0% 7.5% (250)bps
ROCE 6% 7% (1)ppt
Store network - Wickes** 235 235 -
Store network - Tile Giant** 93 94 (1)
*Segmental adjusted operating profit figures are presented excluding property profits
**2019 store network figures for comparison are taken at 31 December 2019
Total sales declined by 8.5% in the half, demonstrating a strong recovery throughout the course of Q2. From the end of
March to mid-May, Wickes stores operated as fulfilment centres for click & collect orders, alongside direct to home
deliveries from the distribution network. Stores reopened to customers in late May, driving an acceleration in DIY
sales as the trend for consumers to carry out DIY projects continued strongly. In June, overall LFL growth was 22%,
despite Kitchen & Bathroom sales not recovering fully, with core DIY sales up nearly 50%.
The sales performance during this period reflected the strength of Wickes' digital capabilities, particularly the
level of integration between digital platforms and stores. Online delivered sales grew by 115%, and click & collect
deliveries up over 1000%. Sales growth was particularly strong in DIY categories, including gardening, and painting
and decorating.
Do-It-For-Me sales through the Kitchen & Bathroom showroom declined by around 40% on a LFL basis with showrooms closed
for April and May, and installation activities paused until June. With the service now fully up and running, lead
generation is running modestly ahead of 2019 levels, with installation recovering more quickly than previously
expected.
Gross margins were broadly flat year-on-year, with a mix shift towards DIY from K&B showroom sales offset by reduced
promotional activity in the DIY categories through the busy spring bank holiday period. Margins on K&B sales also
declined modestly with a greater take up of installation services by customers, particularly since the launch of the
tiling and flooring services.
Operating costs were modestly reduced in absolute terms in the half, with a benefit from the Business Rates Relief
programme partially offset by the higher costs required to operate the supply chain and distribution network on a
socially distanced basis. Against the lower volumes, the operating cost base drove a reduction in overall operating
margin.
The Board still intends to pursue the demerger of Wickes when market conditions are more settled and predictable, and
will update the market in due course.
Plumbing & Heating
H1 2020 H1 2019* Change
Total revenue £475m £713m (33.4)%
Like-for-like growth (22.8)% (3.9)% (18.9)ppt
Adjusted operating profit/(loss)** £(8)m £24m (133.3)%
Adjusted operating margin (1.7)% 3.4% (510)bps
ROCE 4% 12% (8)ppt
Branch network*** 354 375 (21)
*H1 2019 figures include £129m of revenue and £3m of operating profit from PF&P wholesale, which was sold in January
2020. H1 2020 figures include £28m of revenue and £0.7m of operating profit, plus the £1.8m profit on sale of the
business.
**Segmental adjusted operating profit figures are presented excluding property profits
***2019 branch network figures for comparison are taken at 31 December 2019
During lockdown, sales in the P&H segment reduced to around one-third of prior year levels, similar to the other trade
focused businesses, and representing the ongoing support for essential maintenance being carried out on UK homes'
plumbing and heating. The recovery in sales has generally been slower than for the general merchant business, driven
by a slower recovery in new housebuilding, a more gradual return to activity in the social housing sector, and a
careful return to operating in customers' homes by larger contractor installers. Smaller installer customers have
returned to work more quickly, and the Bathroom showroom has performed well since branches reopened.
Gross margins were stable year-on-year, with the impact of lower annual volume rebates offset by the shift in sales
mix towards small installer customers and the business mix change following the sale of the PF&P wholesale business in
January. Absolute overhead costs reduced by around £16m through Government furlough support and variable cost savings
in the supply chain, although the significant drop in volumes drove an operating loss for the business of £8m in H1
2020.
In line with the Group restructuring actions announced in June, 16 P&H branches were closed in June, alongside a
streamlining of above branch activities. This is expected to generate around £25m of annualised cost savings.
While it remains the intention to sell the P&H business, the Group took the opportunity to divest the low-margin
wholesale business of PF&P in January 2020. The Board will continue to improve the remaining Plumbing and Heating
business further whilst assessing opportunities to optimise value for shareholders.
Central costs
Unallocated central costs rose in H1 2020, partly owing to higher costs resulting from the separation of the Wickes
and P&H businesses. In Wickes in particular, the infrastructure had been put in place for Wickes to operate as an
independent business following the proposed demerger in April 2020, but with the demerger process paused there has
been some cost duplication within the Group.
In March 2020 the Group disclosed stranded costs relating to the separation of Wickes and P&H from the Group of around
£15m per annum, anticipating that these would be mitigated over a two-year period. Mitigations will be accessed
through progress on the phased IT modernisation programme to make costs more scalable rather than fixed in the future,
as well as the successful demerger of the Wickes business.
The streamlining of central support functions as part of the restructuring programme is well advanced, and is expected
to generate annualised savings of around £5m.
Property transactions
The impact of the pandemic and resulting lockdown resulted in fewer property transactions being completed in the first
half of 2020 than previously planned. The Group generated around £2m of property profits in the first half (H1 2019:
£6m), and now expects to generate around £10m of property profits in 2020.
Financial Performance
Revenue analysis
During the lockdown period, the greatest revenue impact was experienced across the Merchant businesses, where only
around one third of branches remained open, with trading volumes down by around 80% on the prior year. Both the Retail
and Toolstation segments traded more strongly during lockdown as their established digital capabilities, a switch to
distanced operations through click & collect services and direct delivery enabled a greater degree of trading to
continue as they satisfied strong demand for DIY products.
From the end of April, large parts of the construction industry began to return to work, and the Group correspondingly
opened more Merchant branches to satisfy the increasing demand for materials. This recovery continued throughout May
and June, with the Group returning to a run-rate close to 2019 in July and August, supported by continued strong
domestic RMI and DIY sales.
Volume, price and mix analysis
Total revenue Merchanting Toolstation Retail Plumbing & Heating Group
Volume (25.5)% 14.4% (7.0)% (26.5)% (19.3)%
Price and mix (0.3)% (1.4)% (1.1)% 3.7% 0.0%
Like-for-like revenue growth (25.8)% 12.9% (8.2)% (22.8)% (19.3)%
Network expansion and acquisitions / disposals (0.7)% 23.5% (0.8)% (11.2)% (1.5)%
Trading days 0.6% 0.6% 0.5% 0.6% 0.6%
Total revenue growth (25.9)% 37.0% (8.5)% (33.4)% (20.2)%
Quarterly like-for-like revenue analysis
Merchanting Toolstation Retail P&H Group
Q1 LFL sales growth (8.7%) 9.1% 4.5% (1.9%) (3.8%)
April (73.1%) (1.9%) (53.1%) (69.1%) (63.6%)
May (37.4%) 23.8% (32.1%) (53.0%) (34.6%)
June (17.6%) 27.6% 21.7% (23.4%) (6.7%)
Q2 LFL sales growth (42.9%) 16.5% (19.8%) (48.4%) (34.8%)
H1 LFL sales growth (25.8%) 12.9% (8.2%) (22.8%) (19.3%)
At a Group level, price inflation was neutral in the first half of the year reflecting a benign input cost
environment. There was one extra trading day in the period.
Toolstation total sales include fully consolidated sales from Toolstation Europe, driving the significant step up in
growth between LFL and total sales. Conversely, P&H total sales figures were impacted by the disposal of the PF&P
Wholesale business in January 2020.
Operating profit and margin
The significant drop in revenue negatively impacted profitability with lower gross profit generated. Adjusted
operating profit fell by 81% to £42m (2019: £220m). The Group took significant actions to control its cost base and
has appropriately used government assistance, including accessing the Coronavirus Job Retention Scheme, with up to
15,000 colleagues furloughed in April, and benefitting from the business rates relief scheme.
£m HY 2020 HY 2019 Change*
Merchanting 35 140 (75.0)%
Toolstation 1 13 (92.3)%
Retail 32 52 (38.5)%
Plumbing & Heating (8) 24 (133.3)%
Property 2 6 (66.7)%
Unallocated costs (20) (15) 33.3%
Adjusted operating profit 42 220 (80.9)%
Amortisation of acquired intangible assets (5) (4) 25.0%
Adjusting items (129) (154) (16.2)%
Operating profit (92) 62 (248.4)%
Adjusting items in H1 2020 are primarily related to the restructuring programme announced on 15 June 2020 at a cost of
£111m. In addition, the Group recognised adjusting items of £13m in relation to Wickes store impairments and £9m in
relation to costs to separate Wickes from the Group ahead of the planned demerger. Further details are provided in
note 2.
Adjusting items in H1 2019 primarily related to the impairment charge taken against the IT improvement programme, and
the costs to separate the P&H business from the Group.
In the first half of 2020, as a direct result of the challenging trading conditions, the Group recognised additional
provisions in relation to holiday pay, slow moving stock, rebates, and timing of customer credit account settlement.
Of this, up to £20m may be recovered in the second half of the year as colleagues utilise outstanding holiday before
the year end, and stock and debtor provisions may reduce if the recovery in trading continues.
Finance charge
The net finance charge for the six months to 30 June 2020 was significantly lower than the first half of 2019, at
£34.9m (H1 2019: £43.3m). There was a significant movement in the foreign exchange rates in the period, with the Group
posting a gain on FX of £7m, compared with £0.5m for the same period in 2019.
Interest costs were flat year-on-year, although 2019 also included the costs of refinancing the Group's revolving
credit facility in January 2019.
Interest recognised on lease liabilities was flat year-on-year, at £30m.
Taxation
The tax credit for the period to 30 June 2020, including the effect of adjusting items, is £13.2m, (2019: tax charge
of £58m). This represents an effective tax rate (ETR) of 10.4% (2019: 32.1%).
The tax charge for UK activities for the period before adjusting items is £2.3m (2019: £67m) giving an adjusted ETR of
22% (standard rate 19%, 2019 actual 19.2%). The adjusted ETR is higher than the standard rate due to the effect of
expenses not deductible for tax purposes (such as depreciation of property) and the effects of a reduction in the
deferred tax asset related to employee share schemes following a fall in the Group's share price in the period.
The tax charge for the period, before adjusting items but including overseas activities, is £2.3m (2019: £67m) giving
an adjusted ETR of 111.7% (2019: 19.7%). The increase in ETR is as a result of the non-recognition of losses incurred
in these overseas activities. It is considered that these losses will not be utilised for the foreseeable future.
It is expected that the ETR on UK activities, before adjusting items, for the full year will be in the region of 22%.
This is higher than previous guidance due to the effect of the expected fall in profits for the year as a result of
COVID 19, without a corresponding reduction in expenses incurred which are not deductible for tax purposes. An ETR of
between 20.5% and 21% is expected for future periods.
During the period the Group received a deferred cash benefit on tax payments of £107m. This was as a result of the
Government's decision to allow deferral of VAT payments due on or before 30 June 2020 as a result of the COVID 19
crisis. This amount is required to be repaid to HMRC on or before 31 March 2021. Other than the deferral of VAT, the
Group has not entered any other arrangements with HMRC and has continued to meet its tax liabilities as they fall due.
Earnings per share
The Group reported a statutory loss after tax of £(113)m (H1 2019: profit after tax of £12m) resulting in a basic loss
per share of (45.7) pence (H1 2019: earnings per share of 4.2 pence). There is no significant difference between basic
and diluted basic earnings per share.
Adjusted profit after tax was £4m resulting in adjusted earnings per share (note 11b) of 1.4p (H1 2019: 56.5p). There
is no significant difference between adjusted basic and adjusted diluted earnings per share.
Cash flow and balance sheet
Throughout the Covid-19 crisis, and in particular during the lockdown period, the Group has maintained a close focus
on cash flow and its liquidity position. The actions taken by the Group have protected liquidity throughout,
generating significant cash from working capital in the half and maintaining a strong balance sheet.
Free cash flow
(£m) H1 2020 H1 2019
Group adjusted operating profit excluding property profits 40 214
Depreciation of PPE and other non-cash movements 64 70
Change in working capital* 320 (134)
Net interest paid (excluding lease interest) (5) (4)
Interest on lease liabilities (30) (30)
Tax paid (37) (30)
Adjusted operating cash flow 352 86
Capital investments
Capex excluding freehold transactions (47) (51)
Proceeds from disposals excluding freehold transactions 0 5
Free cash flow before freehold transactions 305 40
*Change in working capital includes around £100m of deferred VAT payments, due to the HMRC in March 2021
The two main drivers of the significant improvement in free cash flow generation in 2020 compared with 2019 were the
difference in adjusted operating profit, offset by a strong performance on working capital.
The significant cash inflow from working capital was driven by a number of factors:
• Inventory reduced by £154m as the business reduced purchase volume and worked to collaborate between businesses to
share stock holdings where appropriate. The inventory held in closed branches has also been shared across the
network. In Toolstation and Wickes, branches remained well stocked with good product availability, but the
unprecedented demand for DIY products has left lower stock levels in some distribution facilities, and some
restocking is likely in the second half of the year.
• Receivables reduced by £393m, primarily driven by the reduction in trade receivable volumes in the second quarter
of the year. Continued strong collections from customers from traded volume in Q1 saw the overall size of the
customer credit book reduce throughout Q2. As the construction industry returns to work, this debtor book will
increase through the second half of the year but will be broadly offset by the corresponding increase in trade
payables.
• Payables also reduced in the period, but to a lesser extent than the change in receivables. This has been
influenced by a move to net settlement of invoices to suppliers, removing the timing difference of standard
pricing rebates. The deferred VAT payment of around £100m, due in March 2021, is also included in non-trade
payables.
Capital investment
As part of the Group's drive to conserve cash in the short term, capital expenditure was constrained in the first half
of the year.
(£m) H1 2020 H1 2019
Maintenance (22) (22)
IT (3) (12)
Growth capex (22) (17)
Base capital expenditure (47) (51)
Freehold property (12) (9)
Gross capital expenditure (59) (60)
Disposals 18 29
Net capital expenditure (41) (31)
Overall base capital spend was broadly flat year-on-year because while capex commitments were curtailed during the
Covid crisis, the cash phasing includes settlement of projects carried out in the final months of 2019 and early 2020.
Maintenance capital expenditure was flat in H1 2020, primarily because of the timing of cash payments on vehicle
purchases in late 2019. The Group has taken the opportunity to rephase vehicle replacements through the first half of
the year, including the reallocation of vehicles previously aligned to branches which have now been closed.
The reduced capital spend on IT programmes reflects the change in approach, moving from a large capitalised programme
to a more phased approach based on the progressive improvement or replacement of existing modules, with a greater
proportion of costs being expensed rather than capitalised.
Growth capex investment was flat due to the phasing of cash payments for investments made in 2019. Growth projects
were paused during the height of the crisis, mainly in Toolstation where no new branches could be opened between the
end of March and June as fitters could not access sites to set the branches up. The network expansion programme is now
back underway, with the target of 60 new branches in 2020.
Uses of free cash flow
H1 2020 H1 2019
Free cash flow (£m) 305 40
Investments in freehold property (12) (9)
Disposal proceeds from freehold transactions 18 24
Acquisitions / disposals 50 (20)
Dividends - (78)
Pensions payments (6) (6)
Sale / (purchase) of own shares 1 (14)
Cash payments on adjusting items (26) (33)
Other (9) (21)
Change in cash/cash equivalents 321 (117)
Combined with the strong free cash flow generation in H1 2020, the overall cash position of the Group was further
boosted by the suspension of the final 2019 dividend payment, due in May 2020. The Group sold £1m of its own shares
(previously held for employee schemes) in the first six months of the year (H1 2019: purchased £14m). The Group
received £50m on the disposal of the PF&P wholesale business in January.
Cash payments on adjusting items were broadly flat year-on-year, with costs primarily focused on the separation of
Wickes from the Group. The cash costs of the restructuring programme announced in June are likely to be around £85m,
with around £35m in 2020.
Net debt and funding
The strong focus on cash and liquidity, and the resulting cash position of the Group, has driven a significant
improvement in the net debt position.
Medium Term Guidance /
H1 2020 H1 2019 Change
Covenant (June 2020)*
Covenant net debt £22m £414m £(392)m
Covenant net debt / adjusted EBITDA 3.5x 0.04x 0.6x
Net debt under IFRS16 £1,441m £1,890m £(449)m
Net debt / adjusted EBITDA 2.5x 2.6x 2.7x (0.1)x
*Leverage covenant for June 2020 was relaxed from 3.0x to 3.5x. It has been waived for December 2020
Covenant net debt reduced by £392m to £22m from 30 June 2019, and by £322m since 31 December 2019. Lease obligations
reduced modestly, so there was a corresponding significant improvement in IFRS16 net debt.
Despite the significant step down in profitability of the Group, the reduction in IFRS16 net debt caused the rolling
12-month Net debt / adjusted EBITDA ratio to reduce year-on-year to 2.6x.
In May 2020 the Group took the prudent step to agree with its lenders a relaxation of its financial covenants for the
test dates at the end of June and December 2020:
• The interest cover covenant has been waived for both June and December 2020
• The net leverage covenant has been relaxed to 3.5x for June 2020
• The net leverage covenant has been waived for December 2020
• A minimum liquidity headroom covenant has been established for September and December 2020
Funding
As at 30 June 2020, the Group's committed funding of £950m comprised:
• £250m guaranteed notes due September 2021, listed on the London Stock Exchange
• £300m guaranteed notes due September 2023, listed on the London Stock Exchange
• A revolving credit facility of £400m, refinanced in January 2019, which has been extended to run until 2025.
As at 30 June 2020, the Group had undrawn committed facilities of £400m (2019: £400m) and deposited cash of £455m
(2019: £52m), giving overall liquidity headroom of £855m.
The Group's credit rating, issued by Standard and Poor's, was maintained at BB+ negative watch following its review in
April 2020, with the risks from the impact of the COVID-19 pandemic on the Group's end-markets broadly offset by the
pausing of the Wickes demerger.
Principal risks and uncertainties
The risk environment in which the Group operates does not remain static and has been significantly impacted by the
global Covid-19 pandemic. This was considered an emerging risk in the Group's 2019 Annual Report & Accounts and,
through the half year review of principal risks and uncertainties, it has been determined that Covid-19 represents a
new principal risk for the Group. The current assessment of the risks faced in relation to Covid-19, and the key
mitigating actions taken to date are set out below, followed by an update on the other principal risks faced by the
Group.
Covid-19
The Covid-19 pandemic has rapidly become a global crisis that has significantly impacted the Group's results and
operations during 2020, as described earlier in this announcement, which should be read in conjunction with this
section. It is not clear how long the pandemic will last, how much more extensive it may become or what further
measures may be introduced by governments to mitigate the associated health, economic and wider societal impacts. The
pandemic may lead to a significant and prolonged impact for the Group in respect of:
• Operational disruption resulting from high levels of colleague absence, due to contracting the virus or attempts
to contain an outbreak at any Group location. This could impact the Group's ability to operate its branch and
distribution network, or provide the necessary functional support to the business, where these cannot be delivered
remotely.
• Pressure on colleagues to adapt to rapidly changing circumstances, ways of working and resourcing levels, which
will continue to evolve both locally and nationally depending on the progression of the pandemic.
• Disruption to the Group's supply chain, which operates across multiple territories. In addition to the proximate
disruptive effects of the pandemic, the supply chain may also be impacted by business closures and consolidation
activity.
• Levels of consumer confidence in an uncertain economic environment, which may adversely impact demand for the
Group's products and services.
The Group's operations and distribution network may also be impacted by measures to contain further localised Covid-19
outbreaks in the UK or in the event of a further wave of the virus that requires a return to national lockdown.
Failure to respond swiftly and appropriately to the many risks presented by Covid-19, which continue to evolve, could
adversely impact the health and wellbeing of colleagues and customers as well as the financial condition and
reputation of the Group.
The Group acted quickly to respond to the challenges posed by Covid-19 with the safety and wellbeing of colleagues and
customers the overriding priority for the Group in its ongoing response to the crisis. Tiered crisis response teams
were mobilised before the UK lockdown to coordinate the actions taken to manage the impact of Covid-19 on colleagues,
customers and operations. These teams continue to monitor the situation closely, with regular oversight from the
Board, and update measures, advice and communications as required.
Colleagues have been regularly consulted throughout the pandemic and are empowered to call out unsafe practices, such
as refusing to complete a delivery if the environment at a delivery site is found to be unsafe. Under normal
circumstances the Group's safety culture and practices are assessed as good but a number of incidents in recent months
suggest that Covid-19 has been an influencing factor both in terms of the physical and mental impact to colleagues of
adapting to changed ways of working, and as a necessary area of focus which may divert attention from more typical
operational hazards. To reinforce that safety is everyone's responsibility, the Group ran an organisation-wide safety
stand down briefing to provide colleagues with the time to reflect and consider the actions that can be undertaken
individually and collectively to take responsibility for their own and each other's safety.
The Group's other major response measures during this challenging period have included:
• Rapid changes to branches and stores that included initial limited provision of products for 'essential services'
only; the introduction of contactless click & collect or call & collect; and closure to browsing. Almost all of
the network is now open and strict social distancing measures and enhanced hygiene routines are enforced.
• Supporting all colleagues able to work from home to do so, which it is anticipated will continue for the
foreseeable future.
• The suspension of the 2019 final dividend payment and a reduction in Board and Executive pay by 20% for three
months.
• Active, detailed management of cost and cash flow, including a significant reduction in non-committed capital
expenditure, reduction in business rates and deferral of VAT payments.
• Monitoring product availability and investigating alternative sources of supply.
• Regular communications to colleagues including a weekly pulse survey reported to leadership and the provision of
extended wellbeing support.
The Covid-19 pandemic, and the related risks and impacts, continue to evolve and cannot be determined with any
certainty. We will therefore continue to monitor the situation and related guidance from the Government, focus
relentlessly on safety and wellbeing, and evolve other mitigation activities and communications as needed.
Other Principal Risks & Uncertainties
With the exception of the Covid-19 risk outlined above, the Directors consider that the principal risks and
uncertainties faced by the Group have been, and are expected to remain, consistent with those described on pages 40 to
51 of the 2019 Annual Report and Accounts. Details are provided for inherent risks relating to the changing customer
and competitor landscape, supplier risks, Brexit, market conditions, capital allocation, change management, portfolio
management, IT systems and infrastructure, cyber threat and data security, health and safety, talent management and
legal compliance. The Directors consider the risk trend to be increasing in relation to market conditions, supplier
risks and the changing customer and competitor landscape. The capital allocation risk trend is now considered static,
with all other risk trends unchanged at this point.
The Group's risks are regularly reviewed and reassessed through a process that considers both internal and external
factors. There are no emerging risks considered significant enough to report at this time. Emerging risks, which are
known risks that are currently difficult to fully assess and/or quantify, are regularly considered and monitored by
the Directors.
Condensed consolidated income statement
Year
Six months ended Six months ended
ended
30 June 30 June
31 December
£m 2020 2019
2019
(unaudited) (unaudited)
(audited)
(re-presented*)
Revenue 2,780.6 3,484.3 6,955.7
Adjusted operating profit (note 20) 42.0 219.8 441.5
Adjusting items - operating (note 2) (128.5) (153.9) (200.4)
Amortisation of acquired intangible assets (5.0) (4.3) (9.0)
Operating (loss) / profit (91.5) 61.6 232.1
Adjusting items - remeasurement of associate - - 40.3
Share of associates' results (0.1) (2.5) (4.3)
Net finance costs (note 5) (34.9) (43.3) (87.3)
(Loss) / profit before tax (126.5) 15.8 180.8
Adjusting items - deferred tax (6.4) - (27.1)
Tax on adjusting items 21.9 27.6 36.2
Other tax (2.3) (31.8) (67.1)
Total tax (note 7) 13.2 (4.2) (58.0)
(Loss) / profit for the period (113.3) 11.6 122.8
Attributable to:
Owners of the Company (113.5) 10.5 121.1
Non-controlling interests 0.2 1.1 1.7
(113.3) 11.6 122.8
Earnings per ordinary share (note 11)
Basic (45.7)p 4.2p 48.9p
Diluted (45.7)p 4.2p 48.4p
Total dividend declared per share (note 12) - 15.5p 33.0p
*Figures for the six months ended 30 June 2019 have been re-presented to include the results of the Plumbing & Heating
segment, which was previously presented as a discontinued operation.
Condensed consolidated statement of comprehensive income
Six months ended Six months Year
30 June ended ended
£m
2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (re-presented) (audited)
(Loss) / profit for the period (113.3) 11.6 122.8
Items that will not be reclassified subsequently to
profit and loss:
Actuarial gains / (losses) on defined benefit pension 6.9 (39.9) (43.0)
schemes (note 8)
Income taxes relating to other comprehensive income (4.7) 15.5 8.3
Items that may be reclassified subsequently to profit and
loss:
Foreign exchange differences on retranslation of foreign (2.6) - 3.2
operations
Other comprehensive loss for the period net of tax (0.4) (24.4) (31.5)
Total comprehensive (loss) / income for the period (113.7) (12.8) 91.3
Attributable to:
Owners of the Company (113.9) (13.9) 91.3
Non-controlling interests 0.2 1.1 -
(113.7) (12.8) 91.3
Condensed consolidated balance sheet
As at
As at As at
30 June
30 June 31 December
£m 2019
2020 2019
(unaudited)
(unaudited) (audited)
(restated - note 1)
ASSETS
Non-current assets
Goodwill 1,359.5 1,222.7 1,359.1
Other intangible assets 321.6 318.5 332.6
Property, plant and equipment 860.2 835.8 882.0
Right-of-use assets 1,212.8 1,208.4 1,276.8
Interest in associates 1.8 46.6 1.9
Investments 6.7 5.8 6.7
Retirement benefit asset (note 8) 66.2 48.5 57.5
Total non-current assets 3,828.8 3,686.3 3,916.6
Current assets
Inventories 786.7 687.3 937.8
Trade and other receivables 849.2 992.3 1,239.7
Tax assets 21.1 - -
Derivative financial instruments 0.4 - -
Cash and cash equivalents 528.5 139.3 207.9
Total current assets 2,185.9 1,818.9 2,385.4
Assets classified as held for sale (note 14) - 762.3 138.0
Total assets 6,014.7 6,267.5 6,440.0
Condensed consolidated balance sheet (continued)
As at
As at As at
30 June
30 June 31 December
£m 2019
2020 2019
(unaudited)
(unaudited) (audited)
(restated - note 1)
EQUITY AND LIABILITIES
Capital and reserves
Issued share capital 25.2 25.2 25.2
Share premium account 545.6 545.5 545.6
Merger reserve 326.5 326.5 326.5
Revaluation reserve 14.5 14.7 14.5
Own shares (47.1) (55.7) (50.8)
Foreign exchange reserve 0.6 - 3.2
Other reserves (1.8) (4.5) (4.1)
Retained earnings 1,612.4 1,645.2 1,722.6
Equity attributable to the owners of the Company 2,475.9 2,496.9 2,582.7
Non-controlling interests 4.6 5.1 4.4
Total equity 2,480.5 2,502.0 2,587.1
Non-current liabilities
Interest bearing loans and borrowings 579.3 583.2 583.3
Lease liabilities 1,215.2 1,193.4 1,253.6
Derivative financial instruments - 4.7 -
Deferred tax liabilities 54.7 33.8 62.7
Retirement benefit liability - - 4.9
Long-term provisions 14.7 - 8.0
Total non-current liabilities 1,863.9 1,815.1 1,912.5
Current liabilities
Lease liabilities 175.0 139.8 158.7
Derivative financial instruments 1.8 - 2.5
Trade and other payables 1,385.9 1,230.5 1,613.9
Tax liabilities - 68.5 13.4
Short-term provisions 107.6 55.9 60.4
Total current liabilities 1,670.3 1,494.7 1,848.9
Liabilities classified as held for sale (note 14) - 455.7 91.5
Total liabilities 3,534.2 3,765.5 3,761.4
Total equity and liabilities 6,014.7 6,267.5 6,440.0
The interim condensed financial statements of Travis Perkins plc, registered number 824821, were approved by the Board
of Directors on 7 September 2020 and signed on its behalf by:
Alan Williams
Nick Roberts Chief Financial Officer
Chief Executive Officer
Condensed consolidated statement of changes in equity
Issued Share Total equity Non-
£m share premium Merger Revaluation Own Foreign Other Retained before controlling Total
capital account reserve reserve shares exchange earnings non-controlling interest equity
interest
At 31 December 25.2 545.6 326.5 14.5 (50.8) 3.2 (4.1) 1,722.6 2,582.7 4.4 2,587.1
2019 (audited)
(Loss)/income - - - - - - - (113.5) (113.5) 0.2 (113.3)
for the period
Other
comprehensive
loss for the - - - - - (2.6) - 2.2 (0.4) - (0.4)
period net of
tax
Total
comprehensive - - - - - (2.6) - (111.3) (113.9) 0.2 (113.7)
(Loss)/income
for the period
Purchase of own - - - - 1.0 - - - 1.0 - 1.0
shares
Option on
non-controlling - - - - - - 2.3 (2.3) - - -
interest
Own shares - - - - 2.7 - - (2.7) - - -
movement
Equity-settled
share-based - - - - - - - 6.1 6.1 - 6.1
payments, net
of tax
At 30 June 2020 25.2 545.6 326.5 14.5 (47.1) 0.6 (1.8) 1,612.4 2,475.9 4.6 2,480.5
(unaudited)
Issued Share Total equity Non-
£m share premium Merger Revaluation Own Other Retained before controlling Total
capital account reserve reserve shares earnings non-controlling interest equity
interest
At 1 January 2019 (as
previously stated) 25.2 545.4 326.5 14.7 (47.8) (5.6) 1,847.5 2,705.9 11.8 2,717.7
(audited)
Impact of change in
accounting policy (as - - - - - - (95.9) (95.9) - (95.9)
previously stated)
At 1 January 2019 (as 25.2 545.4 326.5 14.7 (47.8) (5.6) 1,751.6 2,610.0 11.8 2,621.8
previously stated)
Impact of restatement - - - - - - - (10.2) (10.2) - (10.2)
note 1
At 1 January 2019 25.2 545.4 326.5 14.7 (47.8) (5.6) 1,741.4 2,599.8 11.8 2,611.6
(restated - note 1)
Profit for the period - - - - - - 10.5 10.5 1.1 11.6
Other comprehensive
(Loss)/income for the - - - - - - (24.4) (24.4) - (24.4)
period net of tax
Total comprehensive - - - - - (13.9) (13.9) 1.1 (12.8)
income for the period
Dividends - - - - - - (78.4) (78.4) - (78.4)
Dividend equivalent - - - - - - (0.1) (0.1) - (0.1)
payments
Issue of share capital - 0.1 - - - - - 0.1 - 0.1
Purchase of own shares - - - - (14.0) - - (14.0) - (14.0)
Option of - - - - - 0.8 - 0.8 - 0.8
non-controlling interest
Acquisition of - - - - - - (12.0) (12.0) (7.8) (19.8)
non-controlling interest
Tax on share based - - - - - - 0.1 0.1 - 0.1
payments
Foreign exchange - - - - - 0.3 - 0.3 - 0.3
Own shares movement - - - - 6.1 - (6.1) - - -
Equity-settled
share-based payments, - - - - - - 14.2 14.2 - 14.2
net of tax
At 30 June 2019
(unaudited) (restated - 25.2 545.5 326.5 14.7 (55.7) (4.5) 1,645.2 2,497.0 5.1 2,502.0
note 1)
Condensed consolidated statement of changes in equity (continued)
Foreign Total equity Non-
£m Share Share Merger Revaluation Own exchange Other Retained before controlling Total
capital premium reserve reserve shares reserve earnings non-controlling interest equity
interest
At 1 January 25.2 545.4 326.5 14.7 (47.8) - (5.6) 1,847.5 2,705.9 11.8 2,717.7
2019 (audited)
Impact of
change in - - - - - - - (106.1) (106.1) - (106.1)
accounting
policy
Adjusted
balance at 1 25.2 545.4 326.5 14.7 (47.8) - (5.6) 1,741.4 2,599.8 11.8 2,611.6
January 2019
Profit for the - - - - - - - 121.1 121.1 1.7 122.8
year
Other
comprehensive - - - - - 3.2 - (34.7) (31.5) - (31.5)
income for the
year net of tax
Total
comprehensive - - - - - 3.2 - 86.4 89.6 1.7 91.3
(loss) / income
for the year
Dividends paid - - - - - - - (116.2) (116.2) - (116.2)
Dividend
equivalent - - - - - - - (0.1) (0.1) - (0.1)
payments
Issue of share - 0.2 - - - - - - 0.2 - 0.2
capital
Purchase of own - - - - (7.7) - - - (7.7) - (7.7)
shares
Adjustments in
respect of - - - (0.2) - - - 0.2 - - -
revalued fixed
assets
Arising on - - - - - - - (11.9) (11.9) (9.1) (21.0)
acquisition
Equity-settled
share-based payments, - - - - - - 27.5 27.5 - 27.5
net of tax
Option on
non-controlling - - - - - - 1.5 - 1.5 - 1.5
interest
Own shares - - - - 4.7 - - (4.7) - - -
movement
At 31 December 25.2 545.6 326.5 14.5 (50.8) 3.2 (4.1) 1,722.6 2,582.7 4.4 2,587.1
2019 (audited)
Condensed consolidated cash flow statement
Six months ended Six months ended Year ended
£m 30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
Cash flows from operating activities
Adjusted operating profit 42.0 219.8 441.5
Adjustments for:
Depreciation of property, plant and equipment 48.3 48.0 97.5
Depreciation of right-of-use assets 85.1 84.0 176.5
Amortisation and impairment of intangible assets 8.2 8.5 23.5
Share-based payments 6.8 14.2 19.9
Foreign exchange 4.5 - 4.1
Other non-cash movements (9.9) 0.1 4.2
Gains on disposal of subsidiaries (1.8) - -
Gains on disposal of property, plant and equipment (1.9) (6.0) (20.6)
Purchase of toolhire assets (2.2) - (9.2)
Adjusted operating cash flows 179.1 368.6 737.4
Decrease / (increase) in inventories 153.9 (50.7) (104.2)
Decrease / (increase) in receivables 393.0 (105.0) 12.5
(Decrease) / increase in payables (226.5) 21.5 (36.5)
Payments in respect of adjusting items (26.2) (32.5) (90.0)
Pension payments in excess of charge (6.2) (6.3) (9.9)
Cash generated from operations 467.1 195.6 509.1
Interest paid (5.1) (4.6) (27.0)
Interest on lease liabilities (29.7) (30.1) (57.0)
Debt arrangement fees (0.5) - (2.9)
Income taxes paid (37.5) (30.1) (52.9)
Net cash inflow from operating activities 394.3 130.8 369.4
Cash flows from investing activities
Interest received 0.8 0.4 0.8
Proceeds on disposal of property, plant and equipment 18.0 28.8 82.0
Development of software (2.5) (12.2) (8.4)
Purchases of property, plant and equipment (53.9) (48.2) (125.2)
Interests in associates - (14.9) (20.6)
Acquisition of businesses - - (23.0)
Disposal of business 50.1 - -
Net cash outflow from investing activities 12.5 (46.1) (94.4)
Cash flows from financing activities
Proceeds from the issue of share capital - 0.1 0.2
Sale / (purchase) of own shares 1.2 (14.0) (7.7)
Repayment of lease liabilities / finance lease liabilities (83.9) (85.3) (175.6)
Drawdown on bank facilities 400.0 - -
Repayment of borrowings (400.0) - -
Decrease in loans and liabilities to pension scheme (3.5) (3.4) (3.4)
Dividends paid (note 12) - (78.4) (116.2)
Purchase of non-controlling interest - (19.8) (19.8)
Net cash outflow from financing activities (86.2) (200.8) (322.5)
Net increase/(decrease) in cash and cash equivalents 320.6 (116.1) (47.5)
Cash and cash equivalents at the beginning of the period 207.9 255.4 255.4
Cash and cash equivalents at the end of the period 528.5 139.3 207.9
Notes to the interim financial statements
1. General information and accounting policies
The interim financial statements have been prepared on the historical cost basis, except that derivative financial
instruments, available for sale investments and contingent consideration arising from business combinations are stated
at their fair value. The condensed interim financial statements include the accounts of the Company and all its
subsidiaries ("the Group").
Basis of preparation
The financial information for the six months ended 30 June 2020 and 30 June 2019 is unaudited. The June 2020
information has been reviewed by KPMG LLP, the Group's auditor, and a copy of their review report appears on page 51
of this interim report. The June 2019 information was also reviewed by KPMG LLP. The financial information for the
year ended 31 December 2019 does not constitute statutory accounts as defined in section 435 of the Companies Act
2006. A copy of the statutory accounts for the year ended 31 December 2019 as prepared under International Financial
Reporting Standards as adopted by the EU ("IFRS") has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
The unaudited interim financial statements for the six months ended 30 June 2020 have been prepared in accordance with
IAS 34 - Interim Financial Reporting and have been prepared on the basis of IFRS.
The annual financial statements of the Group are prepared in accordance with IFRS. As required by the Disclosure and
Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared
applying the accounting policies and presentation that were applied in the preparation of the Company's published
consolidated financial statements, with the addition of the policy for the government grants described below, for the
year ended 31 December 2019. The 2019 full year financial statements are available on the Travis Perkins website
( 2 www.travisperkinsplc.co.uk).
Significant impact of COVID-19 outbreak
During the period ended 30 June 2020 the UK's economic outlook has deteriorated as a consequence of the COVID-19
pandemic and the measures taken by the government to control the spread of the virus. In these circumstances, neither
the Group nor its customers have been able to trade in a normal manner.
The Group disclosed in its 2019 Annual Report that it was monitoring the potential impact of coronavirus carefully.
This has subsequently become a principal risk.
Going concern assessment by the Board of Travis Perkins plc
In the context of the current COVID-19 outbreak, the Board of Travis Perkins plc undertook an assessment on 4
September 2020 of the ability of the Group to continue in operation and meet its liabilities as they fall due over the
period to 31 December 2021. In doing so, the Board considered events throughout the period of their assessment,
including the availability and maturity profile of the Group's financing facilities, and concluded that it remained
appropriate to prepare the interim financial statements on a going concern basis on the following basis.
In late March and early April 2020, the Group operated a "service-light" operating model, focusing on serving
customers through remote, non-contact channels with sites primarily running call/click and collect or direct delivery
services to support essential construction programmes. After 20 April 2020, the Group carefully re-opened more of its
Merchant branch network and the Wickes and Toolstation responded at pace to cope with the high levels of consumer
demand.
In June 2020, the Group initiated a restructuring programme involving branch closures and reductions in above-branch
roles. The purpose of this restructuring was to align the cost base of the Group to reduced sales volumes,
particularly in the Merchanting and Plumbing & Heating businesses. As a result the Group is well positioned to trade
through even a significant and long-term decline in volume, has the flexibility to react to changing market conditions
and is adequately placed to manage its business risks successfully. Furthermore, the Group's experience of trading
over the initial lockdown period gives confidence in its ability to operate through subsequent lockdowns if there are
further peaks in infections.
Notes to the interim financial statements
In the analysis performed, the Travis Perkins plc Board considered the impact of the COVID-19 outbreak on the Group's
results and financial position in a range of possible scenarios. The following key assumptions were used in the
central scenario:
• Trading over the remainder of 2020 broadly continues at current levels, with no material improvement over the
Group's experience through July and August
• Business rates relief of circa £80m for the 2020-2021 tax year and no further furlough claims
• No further overhead reductions beyond those identified as part of the recent restructuring programme
• Capital expenditure of circa £70m, net of disposals
• Working capital metrics return to normal, with a cash benefit from stock reduction related to closed branches
A second two-month lockdown scenario was also considered, with trading and cash collection reduced to the levels
experienced by the Group in May 2020, and recovering to a lower level than in the central scenario. In this scenario
it was assumed that the Group would take mitigating measures, including reduced dividend payments, although no further
structural cost savings are included.
Under all scenarios considered, the Group was able to operate for the period ended 31 December 2021 within its
existing borrowing facilities and its financial covenants.
Further reverse stress testing examined the scale of prolonged sales decline required to cause the Group to become
insolvent or to breach its financial covenants and concluded that the magnitude of the sales decline required was not
plausible.
After reviewing these forecasts and risk assessments and making other enquiries, the Board of Travis Perkins plc on 4
September 2020 formed the judgement that there is a reasonable expectation that the Group has adequate resources to
continue in operational existence for the period ended 31 December 2021 and meet its liabilities as they fall due. For
this reason the interim financial statements have been prepared on a going concern basis.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group has applied the
following requirements:
• Amendments to References to Conceptual Framework in IFRS Standards
• Definition of a Business; amendments to IFRS 3
• Definition of Material; amendments to IAS 1 and IAS 8
• Interest Rate Benchmark Reform; amendments to IFRS 9, IAS 39 and IFRS 7
The above requirements did not have a material impact on the Group and have been adopted without restating
comparatives.
Notes to the interim financial statements
Restatement of numbers reported as at 30 June 2019
In the preparation of the Group's 2019 Annual Report & Accounts, certain leases and lease-related current assets and
liabilities were identified, for which the accounting in the 30 June 2019 interim financial statements did not
correctly reflect the adoption of IFRS 16 - Leases on 1 January 2019. The comparative figures have been restated for
these items and this has resulted in the following changes to the reported numbers:
As at As at
£m 30 June 2019 Adjustment 30 June 2019
(reported) (restated)
ASSETS
Non-current assets
Right-of-use assets 1,146.5 61.9 1,208.4
Current assets
Trade and other receivables 1,024.0 (31.7) 992.3
Total assets 6,237.3 30.2 6,267.5
EQUITY AND LIABILITIES
Capital and reserves
Retained earnings 1,655.4 (10.2) 1,645.2
Total equity 2,512.2 (10.2) 2,502.0
Non-current liabilities
Lease liabilities 1,155.6 37.8 1,193.4
Deferred tax liabilities 31.2 2.6 33.8
Total liabilities 3,725.1 40.4 3,765.5
Total equity and liabilities 6,237.3 30.2 6,267.5
These changes also affect the opening balance sheet as at 1 January 2019 as presented in the 30 June 2019 interim
financial statements. The total equity at 1 January 2019 as presented in the 30 June 2019 interim financial statements
has been reduced by £10.2m to £2,611.6m. However these matters were corrected in the 31 December 2019 Annual Report &
Accounts and, as such, there is no restatement of the balances at 1 January 2019 as presented in the 31 December 2019
Annual Report & Accounts in these interim financial statements.
The impact on trade and other receivables represents an adjustment to the initial measurement of right-of-use assets
for lease-related prepayments that were recognised in the balance sheet immediately before the date of initial
application.
This restatement has not affected the income statement for the six-month period ended 30 June 2019 nor has it affected
earnings per share. No adjustment has been made to the depreciation charge on right-of-use assets in that period, as
any such adjustment would have been immaterial.
Notes to the interim financial statements
2. Adjusting items
To enable a reader of the interim financial statements to obtain a clear understanding of the underlying trading, the
Directors have presented the items below separately in the income statement.
Six months ended 30 June
Six months ended 30 June 2019 Year ended 31 December
£m 2020 2019
Adjusting items - operating
Branch closures and restructuring 111.0 - -
Wickes separation and store impairment 9.1 3.5 11.7
Wickes store impairment 12.6 - -
IT-related settlement and impairment charge (4.2) 111.2 107.6
Closure of business - 12.6 13.1
Plumbing & Heating separation and disposal - 26.6 46.5
process
Supply chain restructuring costs - - 21.5
128.5 153.9 200.4
Adjusting items - business acquisitions
Fair value gain on the acquisition of - - (40.3)
Toolstation Europe
- - (40.3)
Adjusting items - tax
Deferred tax rate change 6.4 - -
Rollover relief deferred tax - - 27.1
6.4 - 27.1
134.9 153.9 187.2
Branch closures and restructuring
In June 2020, in response to coronavirus and an expectation of reduced sales volumes in 2020 and 2021, the Group
announced a significant programme of branch closures and the restructuring of distribution, administrative and sales
functions. This will result in the closure of around 165 branches across the overall branch estate, representing
approximately 8% of the Group's network. The branch closures are concentrated in the Merchant businesses and in
particular on small branches in the Travis Perkins General Merchant. In total, the Group expects to reduce the number
of roles by around 2,500 or approximately 9% of the workforce. Costs recognised in relation to these closures are as
follows:
• £56.2m of property costs arising on the closure of branches and office locations, including a £24.4m impairment
charge in respect of right-of-use assets
• £22.8m of redundancy and other restructuring costs
• £21.1m of fixed asset impairments
• £10.9m of inventory provisions in respect of closed branches and associated restructuring
A number of these costs are currently based on estimates and will therefore be revised in the period to 31 December
2020 as the actual costs are incurred.
Notes to the interim financial statements
Wickes separation
The Group incurred costs preparing to demerge the Wickes business, prior to the announcement in March 2020 that the
demerger would be paused given the uncertainty of the impact of coronavirus and the current volatility in the equity
markets. The costs disclosed as adjusting consist of:
• £5.2m of costs related to the separation of IT functions from the Group
• £3.9m of professional service fees incurred in preparation for the demerger
Wickes store impairment
An impairment charge of £12.6m was recognised in respect of five Wickes stores where the impacts of coronavirus have
made it more challenging to implement the performance improvement plans necessary to generate cash flows that support
the stores' value-in-use. The impairment reviews were carried out using assumptions consistent with the impairment
review of the Wickes CGU (note 17). The remaining lease term was used as the remaining useful life. The impairment has
been recognised against the right-of-use assets associated with these stores, which are the only material assets.
IT-related impairment charge
The gain of £4.2m is the result of the full and final settlement of claims in relation to the cancelled replacement of
the Group's merchant ERP system.
Deferred tax rate change
The tax charge includes an adjusting charge of £6.4m arising from the increase in the rate of UK corporation tax
effective on 1 April 2020 from 17% to 19%.
2019
The following items were disclosed as adjusting in 2019:
• An impairment charge of £107.6m after the previous programme to develop a replacement ERP for the Merchant
businesses was halted
• Costs of £46.5m incurred in relation to separation of the Plumbing & Heating business from the Group's central IT
infrastructure and support functions to enable the business to operate autonomously and support any future
disposal
• £11.7m of Wickes separation and demerger costs were disclosed as adjusting following the Group's announcement of
its intention to demerge the Wickes business
• Restructuring costs of £21.5m relating to cost reduction activities in the supply chain and support centre of the
merchant business, including the costs of closure of the Group's range centre and timber network
• Losses recognised following the closure of the Built business in April 2019
• A fair value gain on the acquisition of Toolstation Europe of £40.3m following the remeasurement of the investment
at fair value
• A deferred tax charge of £27.1m following the Group's change in property strategy and therefore its assessment of
its ability to use rollover relief indefinitely on capital gains in 2019.
Notes to the interim financial statements
3. Business segments
The operating segments are identified on the basis of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker ("CODM"), which is considered to be the Board, to assess
performance and allocate capital.
All operating segments sell building materials to a wide range of customers, none of which are dominant, and operate
almost exclusively in the United Kingdom.
Segment result represents the result of each segment without allocation of certain central costs, finance income and
costs and tax. Unallocated segment assets and liabilities comprise financial instruments, current and deferred tax,
cash and borrowings and pension scheme assets and liabilities.
a) Segment results
Six months ended 30 June 2020
£m Merchanting Retail Toolstation Plumbing & Heating Unallocated Consolidated
Revenue 1,384.7 635.9 284.5 475.5 - 2,780.6
Adjusted segment result before property 35.2 31.8 1.2 (8.4) (19.7) 40.1
profits
Property profits 0.1 - - 1.8 - 1.9
Adjusted segment result 35.3 31.8 1.2 (6.6) (19.7) 42.0
Adjusting items (93.2) (25.9) (0.7) (12.0) 3.3 (128.5)
Amortisation of acquired intangible assets (2.8) - (1.9) (0.3) - (5.0)
Segment result (60.7) 5.9 (1.4) (18.9) (16.4) (91.5)
Adjusted segment margin excluding property 2.5% 5.0% 0.4% (1.7%) - 1.4%
profits
Adjusted segment margin 2.5% 5.0% 0.4% (1.4%) - 1.5%
Six months ended 30 June 2019 (re-presented)
£m Merchanting Retail Toolstation Plumbing & Heating Unallocated Consolidated
Revenue 1,869.1 694.8 207.5 712.9 - 3,484.3
Adjusted segment result before property 140.0 52.3 12.6 24.3 (15.4) 213.8
profits
Property profits 7.0 (1.1) - 0.1 - 6.0
Adjusted segment result 147.0 51.2 12.6 24.4 (15.4) 219.8
Adjusting items - (3.5) - (26.6) (123.8) (153.9)
Amortisation of acquired intangible assets (3.0) - (1.1) (0.2) - (4.3)
Segment result 144.0 47.7 11.5 (2.4) (139.2) 61.6
Adjusted segment margin excluding property 7.5% 7.5% 6.1% 3.4% - 6.1%
profits
Adjusted segment margin 7.9% 7.4% 6.1% 3.4% - 6.3%
Notes to the interim financial statements
3. Business segments (continued)
Year ended 31 December 2019
£m Merchanting Retail Toolstation Plumbing & Heating Unallocated Consolidated
Revenue 3,703.4 1,342.4 445.1 1,464.8 - 6,955.7
Adjusted segment result before property 284.3 96.6 24.6 48.4 (33.0) 420.9
profits
Property profits 20.7 - - 1.0 (1.1) 20.6
Adjusted segment result 305.0 96.6 24.6 49.4 (34.1) 441.5
Adjusting items (23.5) (11.6) - (45.4) (119.9) (200.4)
Amortisation of acquired intangible assets (6.1) - (2.6) (0.3) - (9.0)
Segment result 275.4 85.0 22.0 3.7 (154.0) 232.1
Adjusted segment margin excluding property 7.7% 7.2% 5.5% 3.3% - 6.1%
profits
Adjusted segment margin 8.2% 7.2% 5.5% 3.4% - 6.3%
b) Segment assets and liabilities
£m 30 June 2020
Segment assets
Merchanting 2,682.5
Retail 1,627.8
Toolstation 527.4
P&H 547.7
Unallocated 629.3
Total assets 6,014.7
Segment liabilities
Merchanting (1,054.2)
Retail (1,190.8)
Toolstation (264.0)
P&H (322.9)
Unallocated (702.3)
Total liabilities (3,534.2)
4. Seasonality
The Group's trading operations when assessed on a half-yearly basis are mainly unaffected by seasonal factors, however
it is anticipated that there will be higher seasonal variation in 2020 due to the significant impacts of coronavirus.
In 2019, the period to 30 June accounted for 50.1% of the Group's annual revenue (2018: 49.7%).
Notes to the interim financial statements
5. Finance costs
a) Net finance costs
Year
Six months ended Six months ended
ended
30 June 30 June
£m 31 December
2020 2019
2019
Finance income
Fair value gains on derivatives 0.9 - -
Net gains on remeasurement of foreign exchange 6.9 0.5 -
Interest receivable 0.8 1.3 2.5
Other finance income - pension scheme 0.5 1.2 2.4
9.1 3.0 4.9
Finance costs
Interest on lease liabilities (29.7) (30.1) (57.0)
Interest on bank loans and overdrafts (1.7) (1.4) (2.0)
Interest on sterling bonds (10.5) (10.4) (21.0)
Amortisation of issue costs of bank loans* (0.7) (2.2) (2.9)
Other interest (0.2) (0.9) (2.3)
Unwinding of discounts - liability to pension scheme (1.1) (1.1) (2.2)
Unwinding of discounts - property provisions (0.1) - (0.2)
Fair value losses on derivatives - (0.2) (1.3)
Net loss on remeasurement of foreign exchange - - (3.3)
(44.0) (46.3) (92.2)
Net finance costs (34.9) (43.3) (87.3)
*The 2019 charge includes a £1.5m accelerated charge recognised as the result of the replacement of the Group's
previous banking agreement with a new £400m agreement in January 2019.
b) Interest for non-statutory measures
Interest for non-statutory measures is used to calculate fixed charge cover ratio.
12 months ended 12 months ended Year ended
£m 30 June 2020 30 June 2019 31 December 2019
Interest on bank loans and overdrafts 2.3 2.1 2.0
Interest on sterling bonds 21.1 21.0 21.0
Amortisation of issue costs of bank loans 1.4 3.0 2.9
Unwinding of discount - liability to pension scheme 2.2 2.0 2.2
Interest for fixed charge ratio purposes 27.0 28.1 28.1
Notes to the interim financial statements
6. Government grants and other support
The UK government has offered a range of financial support packages to help companies affected by coronavirus,
including the furlough scheme and business rates holidays. During the six-month period ended 30 June 2020 the Group
has received the following benefits from these support packages:
Six months ended
£m 30 June 2020
Government grants from furlough scheme 44.9
Business rates relief 21.3
66.2
The Group has elected to deduct the grants from the furlough scheme in reporting the related expense.
In addition the Group has deferred £107m of VAT payments, which will be paid on or before 31 March 2021.
7. Tax
Six months ended Year ended
Six months ended
30 June 2019 31 December 2019
£m 30 June 2020
(re-presented)
Current tax
- current year - 11.1 44.0
- prior year - - (3.1)
Total current tax - 11.1 40.9
Deferred tax
- current year (13.2) (6.9) (12.1)
- prior year - - 29.2
Total deferred tax (13.2) (6.9) 17.1
Total tax charge/(credit) (13.2) 4.2 58.0
Tax for the interim period is charged on profit before tax, based on the best estimate of the corporate tax rate for
the full financial year.
Notes to the interim financial statements
8. Retirement benefit obligations
(a) Pension scheme asset movement
Six months ended 30 June 2020
£m TP Schemes BSS Schemes Group
Gross pension asset / (liability) at 1 January 55.0 (2.4) 52.6
Administration expenses (0.3) (0.3) (0.6)
Net interest income / (expense) 0.6 (0.1) 0.5
Contributions from sponsoring companies 1.0 5.8 6.8
Return on plan assets (excluding amounts included in net interest) 126.4 35.5 161.9
Actuarial losses arising from changes in financial assumptions (119.6) (35.4) (155.0)
Gross pension asset at 30 June 63.1 3.1 66.2
Deferred tax (12.8)
Net pension asset 53.4
Six months ended 30 June 2019
£m TP Schemes BSS Schemes Group
Gross pension asset / (liability) at 1 January 82.3 (1.1) 81.2
Administration expenses (0.5) (0.2) (0.7)
Current service charge (0.2) - (0.2)
Net interest income / (expense) 1.2 (0.1) 1.1
Contributions from sponsoring companies 1.0 6.0 7.0
Return on plan assets (excluding amounts included in net interest) 103.1 30.8 133.9
Actuarial losses arising from changes in demographic assumptions (0.9) (0.3) (1.2)
Actuarial losses arising from changes in financial assumptions (130.5) (42.1) (172.6)
Gross pension asset / (liability) at 30 June 55.5 (7.0) 48.5
Deferred tax (10.6)
Net pension asset 37.9
Notes to the interim financial statements
8. Retirement benefit obligations (continued)
(a) Pension scheme asset movement (continued)
Year ended 31 December 2019
£m TP Schemes BSS Schemes Group
Gross pension asset / (liability) at 1 January 82.3 (1.1) 81.2
Current service costs and administration expenses (0.9) (0.5) (1.4)
Net interest income 2.3 0.1 2.4
Contributions from sponsoring companies 2.1 11.3 13.4
Return on plan assets (excluding amounts included in net interest) 127.1 34.7 161.8
Actuarial losses arising from changes in demographic assumptions (0.9) (0.3) (1.2)
Actuarial losses arising from changes in financial assumptions (161.5) (48.3) (209.8)
Actuarial gains arising from experience adjustments 4.5 1.7 6.2
Gross pension asset / (liability) at 31 December 55.0 (2.4) 52.6
Deferred tax (8.9)
Net pension asset 43.7
(b) Amounts recognised in the statement of comprehensive income
Six months ended 30 June 2020
£m TP Schemes BSS Schemes Group
Return on plan assets (excluding amounts included in net interest) 126.4 35.5 161.9
Actuarial losses arising from changes in financial assumptions (119.6) (35.4) (155.0)
Actuarial gains on defined benefit pension schemes 6.8 0.1 6.9
Notes to the interim financial statements
8. Retirement benefit obligations (continued)
(b) Amounts recognised in the statement of comprehensive income (continued)
Six months ended 30 June 2019
£m TP Schemes BSS Schemes Group
Return on plan assets (excluding amounts included in net interest) 103.1 30.8 133.9
Actuarial losses arising from changes in demographic assumptions (0.9) (0.3) (1.2)
Actuarial losses arising from changes in financial assumptions (130.5) (42.1) (172.6)
Actuarial losses on defined benefit pension schemes (28.3) (11.6) (39.9)
Year ended 31 December 2019
£m TP Schemes BSS Schemes Group
Return on plan assets (excluding amounts included in net interest) 127.1 34.7 161.8
Actuarial losses arising from changes in demographic assumptions (0.9) (0.3) (1.2)
Actuarial losses arising from changes in financial assumptions (161.5) (48.3) (209.8)
Actuarial gains arising from experience adjustments 4.5 1.7 6.2
Actuarial losses on defined benefit pension schemes (30.8) (12.2) (43.0)
9. Trade and other receivables
As at
As at As at
30 June 2019
30 June 2020 31 December 2019
£m (restated - note 1)
Trade receivables 595.5 705.9 743.0
Allowance for doubtful debts (34.8) (24.3) (20.0)
560.7 681.6 723.0
Other receivables 215.9 224.5 444.4
Prepayments and accrued income 72.6 86.2 72.3
849.2 992.3 1,239.7
The Directors consider that the only class of asset containing material credit risk is trade receivables. No interest
is charged on the trade receivables from the date of the invoice until the date the invoice is classified as overdue
according to the trading terms agreed between the Group and the customer. Thereafter, the Group retains the right to
charge interest at 4% pa above the clearing bank base rate on the outstanding balance.
Notes to the interim financial statements
9. Trade and other receivables (continued)
Expected credit loss assessment
The outbreak of coronavirus has had a material impact on businesses around the world and the economies in which the
Group operates. Given the rapidly changing economic impact and the effect of substantial government and central bank
relief actions and support measures, the Directors have made various judgements to best reflect the range of outcomes
at the reporting date. The expected credit loss for current debt has been increased to reflect the Group's experience
in the 2008-2009 recession and overdue debt has been provided against as if it were one aging bracket older.
The following table provides information about the exposure to credit risk and expected credit losses for trade
receivables as at 30 June 2020.
As at 30 June 2020 As at 31 December 2019
Gross Weighted Loss Credit Gross Weighted Loss Credit
carrying average loss allowance impaired carrying average loss allowance impaired
amount rate amount rate
£m
Current 528.4 1.0% (5.0) No 673.7 0.4% (2.4) No
0 - 30 days 13.9 10.0% (1.3) No 35.0 4.0% (1.5) No
31 - 60 12.6 18.0% (2.2) No 13.6 8.0% (1.1) No
days
61 - 90 6.2 35.0% (2.1) No 3.5 18.0% (0.6) No
days
91 - 120 2.0 71.0% (1.3) No 2.1 31.0% (0.6) No
days
>120 days 32.4 71.0% (22.9) Yes 15.1 91.0% (13.8) Yes
Total 595.5 (34.8) 743.0 (20.0)
10. Share capital
Allotted
No. £m
Ordinary shares of 10p:
At 1 January 2020 252,143,923 25.2
Allotted under share option schemes - -
At 30 June 2020 252,143,923 25.2
Notes to the interim financial statements
11. Earnings per share
a) Basic and diluted earnings per share
Six months ended Year
Six months ended
30 June ended
£m 30 June
2019 31 December
2020
(re-presented) 2019
(Loss) / profit attributable to the owners of the parent (113.5) 10.5 121.1
No.
Weighted average number of shares in issue 248,364,801 248,121,892 247,957,050
Dilutive effect of share options 3,135,205 4,348,093 2,293,525
Weighted average number of shares for diluted earnings per share 251,500,006 252,469,985 250,250,575
(Loss) / earnings per share (45.7)p 4.2p 48.9p
Diluted (loss) / earnings per share (45.7)p 4.2p 48.4p
b) Adjusted earnings per share
Adjusted earnings per share are calculated by excluding the effects of the amortisation of acquired intangible assets,
adjusting items and discontinued operations from earnings.
Six months ended Six months ended Year ended
£m 30 June 30 June 2019 31 December
2020 (re-presented) 2019
(Loss) / profit attributable to the owners of the parent from continuing (113.5) 10.5 121.1
operations
Adjusting items 128.5 153.9 160.1
Tax on adjusting items (21.9) (27.6) (36.3)
Amortisation of acquired intangible assets 5.0 4.3 9.0
Tax on amortisation of acquired intangible assets (1.0) (0.8) (1.6)
Adjusting items - deferred tax 6.4 - 27.1
Earnings for adjusted earnings per share 3.5 140.3 279.4
Adjusted earnings per share 1.4p 56.5p 112.7p
Adjusted diluted earnings per share 1.4p 55.6p 111.6p
Notes to the interim financial statements
12. Dividends
Amounts were recognised in the financial statements as distributions to equity shareholders in the following periods:
Year ended
Six months ended Six months ended
£m 31 December
30 June 2020 30 June 2019
2019
Final dividend for the year ended 31 December 2019 of 33.0 pence (2018: - 78.4 78.2
31.5 pence) per share
Interim dividend for the year ended 31 December 2019 of 15.5 pence per - - 38.0
share
The Board suspended the final dividend payment of 33.0 pence per ordinary share in respect of the year ended 31
December 2019 due to the impact of COVID-19.
No interim dividend is proposed in respect of the year ending 31 December 2020.
13. Borrowings
At the period end, the Group had the following borrowing facilities available:
As at As at As at
30 June 30 June 31 December
£m 2020 2019 2019
Drawn facilities:
Sterling bond 2014 (due September 2021) 254.1 257.5 255.8
Sterling bond 2016 (due July 2023) 300.0 300.0 300.0
554.1 557.5 555.8
Undrawn facilities:
5-year committed revolving credit facility (expires January 2025) 400.0 400.0 400.0
Bank overdraft 30.0 30.0 30.0
430.0 430.0 430.0
The Group continues to work closely with its relationship banking syndicate. Despite the strong liquidity position,
given the impact of the COVID-19 crisis and the resulting lockdown period on the Group's income statement for 2020,
the Group has taken the prudent step to agree a relaxation of the covenants for the test dates at the end of June and
December 2020.
• The interest cover covenant has been waived for June and December 2020
• The net leverage covenant has been relaxed to 3.5x for June 2020
• The net leverage covenant has been waived for December 2020
• A minimum liquidity headroom covenant of £100m under the existing facility as at 30 September 2020 and 31 December
2020
The revolving credit facility was also extended to 2025.
Notes to the interim financial statements
14. Non-current assets held for sale and discontinued operations
On 30 June 2019 the Plumbing & Heating segment was available for immediate sale and the Directors considered that its
sale was highly probable. The assets and liabilities of the Plumbing & Heating segment were therefore presented as
held for sale and its results were reported as a discontinued operation. After this, a decision was made to pause the
sale of the Plumbing & Heating segment and therefore as at 31 December 2019 and 30 June 2020 the assets and
liabilities of this segment are not classified as held for sale.
The Primaflow F&P wholesale business, which formed part of the Plumbing & Heating segment, was sold on 31 January
2020. As at 31 December 2019 the assets and liabilities of this business were classified as held for sale.
a) Assets and liabilities of disposal group classified as held for sale
£m 30 June 2020 30 June 2019 31 December 2019
Assets
Property, plant and equipment - 46.8 4.2
Right-of-use assets - 110.0 19.0
Intangible fixed assets - 68.9 2.9
Inventory - 218.7 35.7
Trade and other current receivables - 317.9 76.2
Total assets - 762.3 138.0
£m 30 June 2020 30 June 2019 31 December 2019
Liabilities
Trade and other payables - (302.7) (71.9)
Tax liabilities - (31.3) -
Lease liabilities - (113.0) (19.6)
Provisions - (8.7) -
Total liabilities - (455.7) (91.5)
Net assets - 306.6 46.5
Notes to the interim financial statements
15. Net debt
Six months
Six months ended ended Year
£m 30 June 30 June ended
2020 2019 31 December 2019
(restated - note 1)
Net debt at 1 January (1,787.7) (353.6) (353.6)
Recognition of lease liability (61.7) (1,510.3) (1,566.9)
Decrease in cash and cash equivalents 320.6 (116.1) (47.5)
Cash flows from debt 0.5 2.9 2.9
Cash flows from repayment of lease liabilities 113.6 115.2 232.6
Cash flows from pension liability 3.5 3.4 3.4
Finance charges movement (0.6) (2.2) (2.9)
Amortisation of swap cancellation receipt 1.7 1.7 3.4
Discount unwind on liability to pension scheme (1.1) (1.1) (2.1)
Discount unwind on lease liability (29.7) (30.1) (57.0)
Net debt at 30 June / 31 December (1,440.9) (1,890.2) (1,787.7)
Less: pension SPV liability 29.1 30.4 31.5
Less: lease liability 1,390.2 1,446.2 1,412.3
Covenant net debt at 30 June / 31 December (21.6) (413.6) (343.9)
Notes to the interim financial statements
16. Financial instruments
The fair values of financial assets and financial liabilities are determined as follows:
• Foreign currency forward contracts are measured using quoted forward exchange rates
• Deferred consideration liabilities are calculated using forecasts of future performance of acquisitions discounted
to present value
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition
at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
There were no transfers between levels during the year. There are no non-recurring fair value measurements.
£m As at 30 June 2020 As at 30 June 2019 As at 31 December 2019
Included in assets
Level 2 - Foreign currency forward contracts at fair 0.4 0.5 -
value through profit and loss
0.4 0.5 -
Current assets 0.4 0.5 -
Non-current assets - - -
0.4 0.5 -
Included in liabilities
Level 2 - Foreign currency forward contracts at fair - - 0.7
value through profit and loss
Level 3 - Deferred consideration at fair value through 1.8 4.7 1.8
equity
1.8 4.7 2.5
Current liabilities 1.8 - 0.7
Non-current liabilities - 4.7 1.8
1.8 4.7 2.5
Notes to the interim financial statements
17. Impairment
The Group tests goodwill and other non-monetary assets with indefinite useful lives for impairment annually or more
frequently if there are indications that an impairment may have occurred. The recoverable amounts of the goodwill and
other non-monetary assets with indefinite useful lives are determined from value-in-use calculations. The key
assumptions for the value-in-use calculations are those regarding the discount rates, growth rates, volume growth in
the relevant markets and operating margins. Management estimates pre-tax discount rates that reflect current market
assessments of the time value of money and the risks specific to the cash-generating unit groupings that are not
reflected in the cash flow projections.
Due to coronavirus and its impact on the UK economy and the Group, an impairment review has been performed on the
Travis Perkins General Merchant, BSS, CCF, Keyline, Plumbing & Heating and Wickes businesses and on their branches and
stores. The Directors' concluded that there is not an indication that the assets of the Toolstation UK and Toolstation
Europe businesses may be impaired and accordingly these businesses and their branches were not reviewed for
impairment.
The impairment reviews have shown that no impairment has occurred in relation to goodwill, but that the Wickes CGU,
which was disclosed as being sensitive to impairment in the Group's 2019 Annual Report & Accounts, remains sensitive
to changes in the assumptions used in the impairment review. Additionally, an impairment of £12.6m has been recorded
in respect of five Wickes stores as discussed in note 2.
Key assumptions
The key financial assumptions used in the estimation of the recoverable amount are set out below. The values assigned
to the key assumptions represent management's assessment of current market conditions and future trends and have been
based on historical data from both external and internal sources.
30 June 2020 31 December 2019
Pre-tax discount rate 11.8% 9.3%
Long-term growth rate 1.6% 1.6%
Management determined the values assigned to these financial assumptions as follows:
• Pre-tax discount rates: these are calculated by reference to the weighted average cost of capital ("WACC") of the
Group and reflect specific risks relating to the Group's industries and the countries in which the Group operates.
The pre-tax discount rate is adjusted for risks not adjusted for in the cash flow forecasts, including risks
related to the size and industry of each CGU. Due to coronavirus and its impact on debt and equity markets, the
Group's cost of capital has increased significantly since December 2019.
• Long-term growth rate: This is the weighted average growth rate used to extrapolate cash flows beyond the budget
period. This represents the forecast GDP growth for the final year considered in the Office for Budget
Responsibility's most recent Economic and Fiscal Outlook report.
Cash flow forecasts are derived from the most recent board approved corporate plans updated for changes in current
trading conditions and adjusted for risks relevant to the cash flows for 2020 and 2021. These updates have included
the impact of coronavirus on sales, operating costs and government support schemes, with the forecasts incorporating
grants from the furlough scheme from July 2020 to October 2020 and business rates relief from July 2020 to March 2021.
The forecasts have not assumed any government support beyond March 2021.
Notes to the interim financial statements
17. Impairment (continued)
The key underlying operating assumptions used in the estimation of future cash flows are:
• Market volumes, on which the approved corporate plans are based, are derived from a variety of sources including
construction and consumer outlook reports, current and forecast housing market transaction numbers and mortgage
approval levels. The Directors consider this to be the principal operating assumption as it determines
management's approach to the interlinked factors underlying the operating margin percentage.
• Operating margin percentage is forecast in the context of the sales market volume assumptions and is based on
historical experience of operating margins, adjusted for the impact of changes to product costs and cost-saving
initiatives.
Cash flows beyond the corporate plan period (2022 and beyond) have been determined using the long term growth rate.
Sensitivity of results to changes in assumptions
Whilst the Directors believe the assumptions are realistic, there are reasonably possible changes in key assumptions
that would cause the recoverable amount of the Wickes CGU to be lower than the carrying amount. The key variables
applied to the value-in-use calculations for Wickes and the value at which the recoverable amount would be equal to
the carrying amount of £595.2m, including the effect of lease liabilities £130.7m in excess of right-of-use assets,
were:
30 June 2020 31 December 2019
Value Sensitivity Value Sensitivity
Pre-tax discount rate 11.8% 12.3% 9.3% 10.7%
Long-term growth rate 1.6% 1.2% 1.6% 0.3%
Market volume growth 1.0% 0.6% 1.0% (0.1%)
Operating margin 5.2% 4.9% 5.1% 4.3%
The market volume growth and operating margin values and sensitivities in this disclosure compare conditions and
performance before coronavirus with the assumed conditions at the end of the corporate plan period. The Directors have
assumed that the unusual economic circumstances and government restrictions that currently exist as a result of
coronavirus will not exist at the end of the corporate plan period.
Notes to the interim financial statements
18. Disposal of business
The Primaflow F&P wholesale business, which formed part of the Plumbing & Heating segment, was sold on 31 January 2020
for cash consideration of £50.1m, generating profit on disposal of £1.8m. As this business did not represent a
separate major line of business or geographical area of operations, it has not been shown as a discontinued operation
in the income statement.
19. Related party transactions
The Group has related party relationships with its subsidiaries and with its Directors. Transactions between group
companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There
have been no related party transactions with directors other than in respect of remuneration. In the first half of
2020 the Group made loans to associates of £nil (2019 H1: £13.6m). Operating transactions with the associates were not
significant during the period.
20. Non-statutory information
a) Adjusted operating profit
Adjusted operating profit is calculated by excluding the effects of amortisation of acquired intangible assets and
adjusting items from operating profit.
Six months ended Six months ended Year ended
£m
30 June 2020 30 June 2019 31 December 2019
Operating (loss) / profit (91.5) 61.6 232.1
Adjusting items (note 2) 128.5 153.9 200.4
Amortisation of acquired intangible assets 5.0 4.3 9.0
Adjusted operating profit 42.0 219.8 441.5
b) Adjusted profit before tax
Adjusted profit before tax is calculated by excluding the effects of amortisation of acquired intangible assets and
adjusting items from profit before tax.
Six months ended Six months ended Year ended
£m
30 June 2020 30 June 2019 31 December 2019
(Loss) / profit before tax (126.5) 15.8 180.8
Adjusting items (note 2) 128.5 153.9 160.1
Amortisation of acquired intangible assets 5.0 4.3 9.0
Adjusted profit before tax 7.0 174.0 349.9
Notes to the interim financial statements
20. Non-statutory information (continued)
c) Ratio of net debt to adjusted EBITDA (rolling 12 months)
Due to the impact of the adoption of IFRS 16 - Leases on 1 January 2019, ratios for the period ended 30 June 2019 were
calculated using two times the result for the six month period.
30 June 2019
30 June 2020 31 December 2019
(6 months)
£m (rolling 12 months) (rolling 12 months)
(restated - note 1)
Operating profit 79.0 61.6 232.1
Depreciation and amortisation 306.5 136.9 300.2
EBITDA 385.5 198.5 532.3
Adjusting items (note 2) 175.0 153.9 200.4
Share of associates' results (1.9) (2.5) (4.3)
Adjusted EBITDA 558.6 349.9 728.4
Adjusted EBITDA (annualised) n/a 699.8 n/a
Net debt (note 15) 1,440.9 1,890.2 1,787.7
Net debt to adjusted EBITDA 2.6x 2.7x 2.5x
d) Fixed charge cover (rolling 12 months)
30 June 30 June 31 December
2020 2019 2019
£m
(rolling 12 months) (annualised 6 months) (rolling 12 months)
Adjusted EBITDA 558.6 349.9 728.4
Adjusted EBITDA (annualised 6 months) n/a 699.8 n/a
Depreciation of property right-of-use assets (annualised 149.0 142.4 147.5
6 months / rolling 12 months)
Interest for fixed charge cover (rolling 12 months) 27.0 28.1 28.1
(note 5)
Interest on lease liabilities (annualised 6 months / 56.6 60.2 57.0
rolling 12 months)
Fixed charge (annualised 6 months / rolling 12 months) 232.6 230.7 232.6
Fixed charge cover 2.4x 3.0x 3.1x
Notes to the interim financial statements
20. Non-statutory information (continued)
e) Free cash flow
Year
Six months ended Six months ended
£m ended
30 June 2020 30 June 2019
31 December 2019
Adjusted operating profit 42.0 219.8 441.5
Less: Profit on disposal of properties (1.9) (6.0) (20.6)
Adjusted operating profit excluding property profit 40.1 213.8 420.9
Depreciation of property, plant and equipment 48.3 48.0 97.5
Amortisation and impairment of internally generated intangibles 8.2 8.5 23.5
Share-based payments 6.8 14.2 19.9
Movement on working capital 320.4 (134.2) (128.7)
Other net interest paid (4.8) (4.2) (26.2)
Interest on lease liabilities (29.7) (30.1) (57.0)
Income tax paid (37.5) (30.1) (52.9)
Capital expenditure excluding freehold purchases (46.9) (51.1) (120.9)
Disposal of plant and equipment 0.1 5.0 19.4
Free cash flow 305.0 39.8 195.5
f) Capital ratios
(i) Average capital employed
30 June 2019
30 June 2020 31 December 2019
£m (6 months)
(rolling 12 months) (rolling 12 months)
(restated - note 1)
Opening net assets 2,502.0 2,611.6 2,611.6
Net pension asset (37.9) (65.8) (65.8)
Net borrowings 1,852.4 1,876.9 1,876.9
Opening capital employed 4,316.5 4,422.7 4,422.7
Closing net assets 2,480.5 2,502.0 2,587.1
Net pension asset (53.4) (37.9) (43.7)
Net borrowings 1,440.9 1,890.2 1,787.7
Closing capital employed 3,868.0 4,354.3 4,331.1
Average capital employed 4,092.3 4,388.5 4,376.9
Notes to the interim financial statements
20. Non-statutory information (continued)
(ii) Return on capital employed
30 June
31 December
30 June 2020 2019
£m 2019
(rolling 12 months) (6 months)
(rolling 12 months)
(restated - note 1)
Adjusted operating profit 263.7 219.8 441.5
Adjusted operating profit (annualised 6 months) n/a 439.6 n/a
Average capital employed 4,092.3 4,388.5 4,376.9
Return on capital employed 6.4% 10.0% 10.1%
g) Like-for-like sales
£m Merchanting Retail Toolstation Plumbing & Heating Total
2019 H1 revenue (re-presented) 1,869.1 694.8 207.5 712.9 3,484.3
Branch closures (37.2) (6.1) (0.8) (0.5) (44.6)
Trading days 14.8 3.8 1.1 4.7 24.4
Disposal of the business - - - (102.6) (102.6)
2019 H1 like-for-like revenue (re-presented) 1,846.7 692.5 207.8 614.5 3,361.5
Like-for-like revenue change (477.0) (56.7) 26.9 (140.3) (647.1)
Branch opening 15.0 0.1 18.8 1.3 35.2
Acquisition of the business - - 31.0 - 31.0
2020 H1 revenue 1,384.7 635.9 284.5 475.5 2,780.6
Like-for-like sales are a measure of underlying sales performance for two successive periods. Branches contribute to
like-for-like sales once they have been trading for more than twelve months. Revenue included in like-for-like sales
is for the equivalent times in both years being compared. When branches close revenue is excluded from the prior year
figures for the months equivalent to the post closure period in the current year.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
• The condensed set of financial statements has been prepared in accordance with IAS 34 - Interim Financial
Reporting, as adopted by the EU;
• The Interim Management Report includes a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining six months of the year; and
b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the
first six months of the current financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related party transactions described in the
last annual report that could do so.
By order of the Board
Nick Roberts Alan Williams
Chief Executive Officer Chief Financial Officer
7 September 2020 7 September 2020
INDEPENDENT REVIEW REPORT TO TRAVIS PERKINS PLC
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 2020 which comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement
of changes in equity, condensed consolidated cash flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and
Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review
of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices
Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review procedures. We read the
other information contained in the half-yearly financial report and consider whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International
Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the
half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company in
meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for
this report, or for the conclusions we have reached.
Anthony Sykes
Senior Partner
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
7 September 2020
══════════════════════════════════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB0007739609
Category Code: IR
TIDM: TPK
LEI Code: 2138001I27OUBAF22K83
Sequence No.: 83664
EQS News ID: 1128433
End of Announcement EQS News Service
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