Final Results - Year Ended 31 December 1999
Travis Perkins PLC
9 March 2000
TRAVIS PERKINS PRE-TAX PROFITS UP 24.3 PER CENT
DIVIDEND UP 13.2 PER CENT
1999 1998 Increase
£'000 £'000 %
Turnover 874.3 623.1 40.3
Operating profit before
reorganisation costs and
amortisation of goodwill 90.4 61.8 46.3
Profit before taxation 75.2 60.5 24.3
Profit after taxation 52.7 41.8 26.1
Basic earnings per share 50.0p 39.9p 25.3
Earnings per share before
reorganisation costs,
amortisation of goodwill
and profit
on sales of properties 59.7p 42.7p 39.8
Final dividend per share 9.4p 8.3p 13.3
Total dividend per share 13.7p 12.1p 13.2
Frank McKay, chief executive, said: 'In my first review
as chief executive I am able to report continued growth
and improved profitability for what has been a year of
significant progress. In a programme of vigorous
expansion we acquired 18 individual businesses which
added 165 branches to our UK network. By the end of the
year we were trading from 454 branches.'
On the outlook, Tony Travis, chairman, commented: 'The
integration of Keyline and Sharpe & Fisher will lead to
further gains this year, while additional expenditure on
council housing stock, together with the recent increase
in the general level of property transactions, is likely
to stimulate the important repair and maintenance market.
As a result, we feel confident regarding the prospects
for our Company and the industry in which we operate.'
Enquiries: Frank McKay
Chief Executive
Tel: 0171 820 0366 (today)
Tel: 07771 838 439 (tomorrow)
Issued on behalf of Travis Perkins plc by Tavistock
Communications Limited (contact: Keith Payne, tel: 0171
600 2288)
Chairman's Statement
Results
In a year that has seen the largest expansion of the
Group in its history, I am pleased to report that pre-tax
profits for the year ended 31st December 1999 were £75.2
million, an increase of 24.3% over the £60.5 million
earned in 1998. The 1999 figure is after charging £6.6
million exceptional costs associated with the
reorganisation of certain acquisitions and after the
amortisation of £4.2 million of goodwill.
Turnover at £874.3 million was 40.3% ahead of the
previous year. The acquisitions of Keyline and Sharpe and
Fisher during the year largely accounted for this
increase.
Basic earnings per share were 50.0 pence, compared with
39.9 pence in 1998, an increase of 25.3%. Adjusted for
reorganisation costs, amortisation of goodwill and profit
from the sale of surplus properties, earnings per share
were 59.7p compared with 42.7p in 1998, an increase of
39.8%.
These are very satisfactory results during a period of
considerable consolidation in the industry in which your
Group played its part. We are now one of the top three
distributors of building materials in the United Kingdom
and intend to develop this position further.
Dividend
The board is recommending a final dividend of 9.4 pence
per share, giving a total dividend for the year of 13.7
pence, an increase of 13.2% on the 12.1 pence per share
paid for the previous year.
Board of Directors
After 32 years of service, Ted Adams retired as managing
director at the end of last year. Ted has been
fundamental to the development of the company, helping to
build it up in his early career, restructuring it during
the deep recession at the start of the 1990's and
developing it into a leading position in the industry in
recent years. We thank him for everything and are very
pleased that he will be remaining on the board in an
executive role until the end of July when he will become
a non-executive director.
Frank McKay joined the board on 1st November 1999 and was
appointed chief executive on 1st January 2000. Frank has
gained many years of experience through senior management
roles in the United Kingdom, Europe and the United
States. Prior to joining our Group he was an executive
director of Blue Circle plc and chief executive
responsible for their Heating Division. We welcome him
to our board and look forward to the contribution he will
make. Consequently, from the start of this year I have
relinquished my role as chief executive in order to spend
more of my time as chairman.
We would also like to welcome Charles Fisher to the board
as a non-executive director. Charles was appointed on
1st January 2000 following the acquisition of Sharpe and
Fisher where he was executive chairman. His experience
and wide knowledge of the industry will be a great asset.
Staff
In the constant quest to improve the quality of our
operations we ask much of all our staff who now number
more than 7,000. On behalf of the board I would like to
thank them for everything they have done to make 1999
another successful year for the Company.
Outlook
In 1999 the market for our products strengthened
gradually as the year progressed. Consumer confidence
increased during the year and mortgage lending and
property transactions rose. Concern that higher
consumption might lead to higher inflation prompted the
Bank of England to raise interest rates.
The integration of Keyline and Sharpe and Fisher will
lead to further gains this year, while additional
expenditure on council housing stock together with the
recent increase in the general level of property
transactions, is likely to stimulate the important repair
and maintenance market. As a result, we feel confident
regarding the prospects for our Company and the industry
in which we operate.
A Travis 9th March 2000
Chief Executive's Review
Results
In my first review as chief executive I am able to report
continued growth and improved profitability for what has
been a year of significant expansion. Operating profit
before reorganisation costs and amortisation of goodwill
rose by 46.3% from £61.8 million to £90.4 million of
which £17.1 million was a contribution from acquisitions
made during the year. Operating profit as a percentage of
sales increased to 10.3%. We estimate that our market
share is around 12.5%.
Acquisitions
In a programme of vigorous expansion we acquired 18
individual businesses which added 165 branches to our UK
network. By the end of the year we were trading from 454
branches. The total amount spent on acquisitions was
£284.6 million.
The largest acquisition, in June, was Keyline Builders
Merchants Limited. Keyline operates from 101 branches
located throughout the country and complements the Travis
Perkins network by being particularly strong in the north
of England and Scotland. We have converted 32 Keyline
branches to the Travis Perkins brand. These are
developing well and Keyline's 69 other branches retain
the Keyline brand and continue to specialise in the
stocking and selling of heavyside building material
products. The transfer of all the Keyline branches on to
Travis Perkins electronic point of sale and accounting
systems was completed on schedule.
In December last year we acquired Sharpe & Fisher plc.
Trading from 38 branches in the south-west of England and
Wales, it greatly strengthens our presence in this part
of the country. All Sharpe & Fisher branches, whose
customer focus is similar to that of Travis Perkins
Trading Company Limited, will have been rebranded by the
end of May 2000.
A further 10 tool hire outlets were opened, in addition
to 10 acquired with Keyline and 11 with Sharpe & Fisher,
bringing the total to 120 at the end of the year.
Included with other smaller acquisitions was the addition
in March 1999 of Smiths and Sons (London) Limited,
operating from 9 branches in Greater London.
We continue to explore all opportunities to enhance our
market position.
Branch developments
Developments within our existing branch network included
the establishment of specialist centres for silent
flooring systems in Kings Lynn, Aylesford, Portslade and
Maidenhead. We also continued to extend the number of
specialist insulation and dry lining centres and
decorating centres. Major refurbishments to our branches
at Rushden, Felixstowe, Bala, Hoylake and Aylesbury were
also carried out.
Travis Perkins Trading Company Limited
The gross profit including rebate, for all product
groups, continued to improve as a percentage of sales due
principally to further efficiency gains throughout the
business and a closer, more focused relationship with our
suppliers.
Sales of heavyside building materials showed good like-
for-like gains over the previous year and demonstrated
our continuing strength in this product range. Timber
sales were impeded by downward pressure on prices in an
intensely competitive market.
D.W. Archer Limited
This company, specialising in the importing, machining
and distribution of softwood and the assembly of timber
roofing products, found conditions less buoyant than
expected as pressure on prices and margins increased.
Timber cost prices fell largely as a result of the
continued strength of sterling and like-for-like sales
volumes were slightly below those of the previous year.
Travis Perkins (Properties) Limited
Our property holding company, Travis Perkins (Properties)
Limited, sold four surplus sites in 1999, generating a
profit of £0.6 million compared with a profit on
disposals of £0.9 million in the previous year.
E - Commerce
We extended the capabilities of our existing internet
site by adding on-line price enquiry and electronic
ordering services for our customers. These systems are
fully integrated with our core electronic point of sale
applications. A further new internet service allows
customers to access their account balances and to print
off copy documents, such as invoices, statements and
credit notes. Additional product information, including
illustrations, specifications and health and safety data,
is now available through the internet for an ever-
increasing number of products. New websites have been
launched for the Keyline and D.W. Archer brands.
Development of electronic data interchange links to our
customers and suppliers has continued. The volume of
electronic invoices received increased by some 50% and we
support a full set of electronic ordering and invoicing
processes with both suppliers and customers.
Customer Service
We will intensify our focus on delivering superior value
and improved service. To this end we have increased our
investment in staff skills training, enhanced the quality
of our product literature and upgraded our systems. We
are constantly refining our continuous improvement
programmes in order to achieve still higher standards.
Pivotal to the growth of our company is the close
relationship we enjoy with our customers, yet we could
not succeed without the quality, dedication and
commitment of our staff at all levels. I thank them for
their efforts in 1999 which have contributed enormously
to the achievement of another record year for the
Company.
F.J.McKay 9th March 2000
Finance Director's Report
Results
Operating profit after goodwill amortisation and
reorganisation costs totalled £79.6million, an increase
of 37% over 1998. Goodwill amortisation totalled
£4.2million (1998 £0.5 million) and exceptional
reorganisation costs were £6.6 million (1998 £3.2million)
Acquisition Financing
The total consideration for acquisitions including
transaction costs was £284.6 million comprising £184.6
million in respect of Keyline for 100% cash, £83.6million
in respect of Sharpe & Fisher, of which 58% was in cash
and loan notes and 42% in shares and £16.4 million, all
cash, in respect of other acquisitions.
Two loan facilities were arranged to finance the
acquisitions, a £200 million term and revolving
syndicated credit facility, repayable over a 5 year
period ending in May 2004 and a £25 million facility
repayable in November 2002. In addition, loan notes to
the value of £11.8 million were issued to Sharpe & Fisher
shareholders, redeemable at six monthly intervals ending
in January 2010.
At 31st December 1999, net borrowings of £181.6million,
were 85% covered by a 3 year interest rate swap into a
fixed rate of 5.5%. The market value of the swap at 31st
December 1999 is £3.5 million reducing basis.
Interest
Net interest charged in the year was £5.0 million. This
compares with interest credited of £1.5 million in 1998.
The increased cost is attributable to the financing of
acquisitions made during the period.
Exceptional costs
Exceptional re-organisation costs totalled £6.6 million.
Of this £3.6 million related to the integration of
Keyline Builders Merchants Limited and £3.0 million to
Sharpe & Fisher plc. The centralisation of both
accounting and computer systems has led to Head Office
redundancy costs at Kirkintilloch and Cheltenham and the
write-off of computer equipment.
Taxation
The effective rate of taxation, after adjusting for
property profits and goodwill amortisation, was 28.6%
(1998: 31.2%). The lower rate results from a reduction
in the rate of corporation tax from 31% to 30% in April
1999 and a favourable short term acceleration in capital
allowances.
Shareholders' Funds
Total equity shareholders' funds increased by 45.4% to
£313.4 million from £215.5 million. This results from
£37.8 million of retained profit, together with £36.3
million from the issue of new shares and £23.8 million of
additional value in the Company's properties after the
recent revaluation.
The number of shares in issue increased by 5.7 million
(5.4%) to 110.6 million during the year. Shares issued
as a result of the acquisition of Sharpe & Fisher plc
totalled 5.2 million with the balance being due to the
exercise of employee and director share options.
The return on equity funds increased to 27.1% in 1999
from 25.3% in 1998.
At the year end the share price was 666.5 pence, and the
market capitalisation £737 million, representing 2.4
times shareholders' funds.
Property Valuation
The majority of the Group's freehold and leasehold
property portfolio, with the exception of those
properties already valued on acquisition in the previous
18 months, was valued at open market value on an existing
use basis as at 31st December 1999. The valuation was
carried out by an independent professional valuer and
totalled £113.0million, a surplus of £23.8million on net
book value. Properties previously valued and not included
in this valuation are carried at a net book value of
£37.3million. The total carrying value of the 464
properties on the balance sheet is £150.3million
representing 48% of shareholders' funds. Freehold
properties represent 58% of the total.
Goodwill
The net book value of goodwill in the balance sheet is
£181.1 million and is being amortised over 20 years.
Additions to goodwill in the year amounted to £172.4
million of which £106.8 million related to the
acquisition of Keyline, £59.2 million related to the
acquisition of Sharpe & Fisher and £6.4 million related
to other acquisitions.
In accordance with FRS 10, an impairment review was
carried out at December 1999, the end of the first full
year following the 1998 acquisitions. No impairments
were identified as a result of this review.
Cash flow
Increased profitability and improved working capital
management have contributed to a higher cash inflow from
operating activities in the year, which has increased by
61% from £66.4 million to £106.6 million. The net debt
balance at the year end of £181.6 million represents a
gearing level of 57.7%, compared with a net cash balance
of £31.1 million at the end of 1998. Interest costs of
£5.0 million were covered 18 times by operating profit
before reorganisation costs and amortisation of goodwill.
Accounting Policies and Standards
The accounting policies for the Group are set out on in
the Report and Accounts. FRS 12, the new standard on
provisions, contingent liabilities and contingent assets,
was implemented during the year. In addition, the
disclosure requirements contained in FRS 13, the new
standard on derivatives and other financial instruments,
have been included in these financial statements.
Treasury Risk Management
Treasury activities are managed centrally under policies
and procedures approved and monitored by the board. The
main risk facing the Group is exposure to interest rate
fluctuations. The Group is not exposed to significant
foreign exchange risk as most purchases are invoiced in
sterling. Where there is exposure, forward contracts are
used where appropriate. In 1999 these contracts
represented less than 10% of currency purchases.
Interest Rate Risk
The Group finances its operations through a mixture of
retained profits, bank borrowings and loan notes. The
Group borrows at floating rates and uses interest rate
swaps into fixed rates to generate the preferred interest
rate profile and to manage the Group's exposure to
interest rate fluctuations.
Liquidity Risk
The Group's policy has been to ensure that it has
committed borrowing facilities in place in excess of its
peak forecast gross borrowings for at least the next
twelve months. At the year end £40.0million of the
£225.0 million loan facility was unused. In addition
available overdraft facilities totalled £29.0 million.
Year 2000
The directors are aware of the potential risks
surrounding the year 2000 issue. At the beginning of the
current year few problems were experienced with systems.
As at the date of this report, the directors are not
aware of any significant factors which have arisen, or
that may arise, which will affect the activities of the
Group. However, the situation is still being monitored.
Any future costs associated with this issue are not
expected to be significant.
P.N.Hampden Smith 9th March 2000
Consolidated Profit & Loss Account
for the year ended 31st December 1999
£m 1999 1998
Continuing Operations Acquisitions
Turnover 662.9 211.4 874.3 623.1
====== ====== ====== ======
Operating profit before
reorganisation costs
and amortisation
of goodwill 73.3 17.1 90.4 61.8
Reorganisation costs - (6.6) (6.6) (3.2)
Amortisation of goodwill (0.7) (3.5) (4.2) (0.5)
------ ------ ------ ------
Operating profit after
reorganisation costs
and amortisation
of goodwill 72.6 7.0 79.6 58.1
Profit on sale
of properties 0.6 - 0.6 0.9
------ ------ ------ ------
Profit on
ordinary
activities
before interest 73.2 7.0 80.2 59.0
------ ------
Net interest (payable) / receivable (5.0) 1.5
------ ------
Profit on ordinary
activities before taxation 75.2 60.5
Tax on profit on ordinary
activities (22.5) (18.7)
------ ------
Profit on ordinary
activities after taxation 52.7 41.8
Dividends paid and proposed (14.9) (12.7)
------ ------
Retained profit transferred
to reserves 37.8 29.1
------ ------
Earnings per ordinary share
Basic 50.0p 39.9p
Diluted 49.6p 39.8p
Before reorganisation costs,
amortisation
of goodwill and profit
on sale of
properties 59.7p 42.7p
------ ------
Dividend per ordinary share 13.7p 12.1p
------ ------
There is no material difference between the result as
disclosed in the Group profit and loss account and the
result
on an unmodified historical cost basis.
Balance Sheets
for the year ended 31st December 1999
The Group The Company
£m 1999 1998 1999 1998
Fixed assets
Tangible assets 194.2 96.3 0.1 0.1
Intangible
assets - goodwill 181.1 12.9 - -
Investments 4.0 3.4 381.3 114.4
------ ------ ------ ------
379.3 112.6 381.4 114.5
------ ------ ------ ------
Current assets
Stocks 127.8 82.9 - -
Debtors 205.5 111.3 46.6 17.3
Properties held
for resale 0.3 0.6 - -
Cash at bank
and in hand 17.0 31.7 2.0 36.8
------ ------ ------ ------
350.6 226.5 48.6 54.1
Creditors: amounts falling due
within one
year (227.3) (122.5) (40.3) (10.2)
------ ------ ------ ------
Net current
assets 123.3 104.0 8.3 43.9
------ ------ ------ ------
Total assets
less current
liabilities 502.6 216.6 389.7 158.4
Creditors: amounts
falling due after
more than one year (185.1) (0.2) (238.2) (43.6)
Provisions for liabilities
and charges (3.0) (0.9) - -
------ ------ ------ ------
314.5 215.5 151.5 114.8
====== ====== ====== ======
Capital and reserves
Called up share 11.1 10.5 11.1 10.5
capital
Share premium
account 52.0 15.9 50.9 14.8
Revaluation
reserves 32.0 7.8 - -
Profit and loss
account 218.3 181.3 89.5 89.5
------ ------ ------ ------
Total equity
shareholders'
funds 313.4 215.5 151.5 114.8
Minority interests
- non equity 1.1 - - -
------ ------ ------ ------
314.5 215.5 151.5 114.8
------ ------ ------ ------
Consolidated Cash Flow Statement
for the year ended 31st December 1999
£m 1999 1998
Net cash inflow from operating
activities 106.6 66.4
------ ------
Returns on investments and
servicing of finance
Interest received 1.2 1.6
Interest paid (5.1) (0.1)
------ ------
Net cash (outflow) / inflow
for returns on
investments and servicing
of finance (3.9) 1.5
------ ------
Taxation
UK corporation tax paid
(including A.C.T.) (24.6) (14.7)
------ ------
Capital expenditure and financial
investment
Purchase of tangible
fixed assets (17.5) (13.1)
Receipts from sales of
tangible fixed assets 1.9 2.4
------ ------
Net cash outflow for
capital expenditure
and financial investment (15.6) (10.7)
------ ------
Acquisitions
Purchase of business
undertakings (237.6) (26.6)
Net overdrafts acquired
with business undertakings (14.2) (2.8)
------ ------
Net cash outflow for acquisitions (251.8) (29.4)
------ ------
Equity dividends paid (13.1) (12.1)
------ ------
Cash (outflow) / inflow
before use of
liquid resources
and financing (202.4) 1.0
Management of liquid resources
Cash inflow from short
term deposits 11.8 2.7
------ ------
Financing
Issue of ordinary share capital 1.5 0.5
New bank loans 205.0 -
Repayment of bank loans (20.0) -
Repayment of unsecured loan
notes - (2.4)
Capital element of finance lease (0.2) (0.6)
rentals
------ ------
186.3 (2.5)
------ ------
(Decrease) / increase in cash
in the year (4.3) 1.2
------ ------
Reconciliation of Movements in Equity Shareholders' Funds
for the year ended 31st December 1999
1999 1998
£m
Shareholders' funds at 1st January 215.5 185.9
------ ------
Profit attributable to
shareholders of the Company 52.7 41.8
Dividends (14.9) (12.7)
------ ------
Retained profit transferred
to reserves 37.8 29.1
New share capital subscribed 36.3 0.5
Revaluation of properties 23.8 -
------ ------
Net increase in shareholders' funds 97.9 29.6
------ ------
Shareholders' funds at 31st December 313.4 215.5
------ ------
Statement of Total Recognised Gains and Losses
for the year ended 31st December 1999
1999 1998
£m
Profit attributable to
shareholders of the Company 52.7 41.8
Unrealised surplus on
revaluation of properties 23.8 -
------ ------
Total recognised gains and losses
relating to the year 76.5 41.8
Notes:
* The accounting policies used are consistent with
those stated in the financial statements of the
group for the year ended 31st December 1998.
* These statements are not statutory accounts within
the meaning of s240 of the Companies Act 1985.
* The results for the year ended 31st December 1998
are taken from the Group's statutory accounts which
carry an unqualified auditors' report and which have
been filed with the Registrar of Companies.
* Statutory accounts for the year ended 31st December
1999 on which the auditors have given an unqualified
report will be delivered to the Registrar of
Companies in due course.
* The statutory accounts both for the year ended 31st
December 1998 and the year ended 31st December 1999
did not contain a statement under s237 (2) or (3) of
the Companies Act 1985.
* An interim dividend of 4.3 pence was paid to
shareholders on 1st November 1999. The proposed
final dividend of 9.4 pence will be paid on 17th May
2000 to shareholders on the register at 14th April
2000.
* It is intended to post the Report and Accounts on 20th
March 2000 and to hold the Annual General Meeting on
18th April 2000.
Reconciliation of Operating Profit to Net Cash Flow from
Operating Activities
1999 1998
£m
Operating profit after reorganisation
costs and amortisation of goodwill 79.6 58.1
Depreciation charges 12.9 8.9
Other amounts written off tangible
fixed assets 1.9 -
Amortisation of goodwill 4.2 0.5
Profit on sale of fixed assets (0.3) (0.5)
Decrease / (increase) in stocks 1.2 (5.8)
Increase in debtors (15.2) (3.0)
Increase in creditors 22.3 8.2
------ ------
Net cash inflow from operating
activities 106.6 66.4
------ ------
Reconciliation of Net Cash Flow to Net Movement in
(Debt)/Cash
1999 1998
£m
(Decrease) / increase in cash in year (4.3) 1.2
Cash (inflow from) / outflow to repay
debt (185.0) 2.4
Cash inflow from decrease in liquid (11.8) (2.7)
resources
------ ------
Change in net cash resulting from
cash flows (201.1) 0.9
Non-cash changes (11.8) -
Decrease in finance leases 0.2 -
------ ------
Movement in net cash in year (212.7) 0.9
Net cash at 1st January 31.1 30.2
------ ------
Net (debt) / cash at 31st December (181.6) 31.1
------ ------
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