Interim Results
TRAVIS PERKINS PLC
9 September 1999
TRAVIS PERKINS PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1999
SUMMARY
Six months Six months Year
30 June 1999 30 June 1998 31 Dec 1998
(Reviewed) (Reviewed) (Audited)
Turnover £358.76m £304.45m £623.08m
Operating profit before
Reorganisation costs and
amortisation of goodwill £36.93m £27.96m £61.84m
Pre-tax profit £34.35m £26.12m £60.58m
Basic earnings per share 22.4p 17.4p 39.9p
Dividend per share 4.3p 3.8p 12.1p
* Turnover up 17.8%
* Operating profit before reorganisation
costs and amortisation of goodwill up 32.1%
* Pre-tax profit up 31.5%
* Basic earnings per share up 28.7%
* Interim dividend per share up 13.2%
Tony Travis, chairman, reports: 'Good progress is being made
with the integration of Keyline acquired at the beginning of
June. During the half year we also acquired 20 smaller
merchant branches in locations which enhance our existing
distribution network.
'Greater consumer confidence in recent months has led to an
increase in the demand for houses. New housing starts have
also begun to increase and house prices are rising. Overall
there is a gradual improvement in construction activity and we
view the future for our enlarged group with confidence.'
Enquiries: Tony Travis
tel: 0171 820 0366 (7.45 am - 8.30 am and from 2.30pm)
CHAIRMAN'S INTERIM STATEMENT
I am pleased to report pre-tax profits for the six months to
30 June 1999 of £34.4 million, an increase of 31.5% over the
£26.1 million reported for the first half of 1998.
Group sales at £358.8 million were 17.8% ahead, reflecting a
1.8% growth in like for like sales with the remaining increase
coming from acquisitions.
Operating profit, before reorganisation costs and the
amortisation of goodwill, was £36.9 million, a 32.1% increase
on the previous year. The operating profit is equivalent to
10.3% of sales compared with 9.2% achieved in the first half
of 1998.
The half year under review has seen considerable development
highlighted by the acquisition of Keyline Builders Merchants
Limited from CRH plc at the beginning of June. At the time of
acquisition Keyline was the fifth largest builders' merchant
in the UK and brought Travis Perkins an additional 101
branches located throughout the country, generally focused on
the supply of products in the heavyside building material
range. As one of the three largest merchants, the group's UK
market share has now risen to around 11.5%.
Good progress is being made with the integration of the
business. We have rebranded 32 Keyline branches as Travis
Perkins and are broadening and re-merchandising their stock
range. The remaining 69 branches are to remain branded as
Keyline, trading nationally with their present product
emphasis on civil engineering materials, cement, bricks,
lintels, aggregates and roofing and insulation materials.
These branches are being managed from Kirkintilloch near
Glasgow, while central services are being transferred to our
Head Office in Northampton.
The integration and development of the Keyline business will
continue to be our major task over the next twelve months. We
are very pleased to welcome the staff of Keyline to our group
and look forward to working with them in the future.
We were also actively involved during the first half of the
year with the acquisition of a number of smaller merchants in
locations which enhance our existing distribution network.
Altogether 20 such branches have been added. By the end of
June 1999 the total number of branches in the group had risen
to 410.
We have also been developing our existing branches, completing
a number of projects that have improved the presentation of
our product range to the collecting customer, both in our
yards and warehouses.
We have continued the programme of opening tool hire outlets
within certain branches, completing seven new openings in the
six months under review. We have also acquired a further 10
tool hire outlets with Keyline, bringing the group total to
106 at the end of June.
As we reported last March, FRS10, the accounting standard on
goodwill, was implemented during 1998. Primarily as a result
of the acquisition of Keyline the amount of goodwill
capitalised in our balance sheet has increased from £12.9
million at the end of December 1998 to £119.6 million at the
end of June 1999. The level of amortisation will increase in
the future, the board having decided to amortise goodwill over
20 years. In the period under review, which includes
Keyline's trading for one month only, the goodwill
amortisation charge was £0.8 million.
We are also disclosing separately in our accounts the costs
associated with the reorganisation and integration of Keyline.
At 30 June 1999 these amounted to £1.7 million. We anticipate
the total figure will be within the £7.5 million announced at
the time of the acquisition.
The improvement in operating profit in the first half of this
year has a number of welcome features. Despite a sluggish
market and little or no inflation in the average cost price of
the products we stock, our like for like sales moved ahead by
2% against the previous year. Timber, forest products and
plumbing and heating products suffered an average cost price
fall over the first half of 1998, while the average cost price
for heavyside and lightside building materials rose.
As a result of the programmes for margin improvement
implemented in recent years, including a new purchase order
management system, enhanced levels of staff training,
investment in security systems and the continuing roll-out of
a new stock management system, we have continued to deliver an
improvement in our gross margin. This increased by 1.3% of
sales against the first half of 1998. Rebates as a percentage
of sales also increased, as our relationship with key
suppliers continued to strengthen.
All four Travis Perkins regions have improved their
profitability, expressed both as a percentage of sales and as
a return on capital. The businesses we have acquired over the
past three years made a pleasing contribution.
There was a modest increase in overheads as a percentage of
sales against the first half of 1998. This reflected an
increase in payroll costs, partly due to the well earned
increase in management and staff bonuses following the higher
level of profitability. The bad debt provision increased from
0.6% to 0.7% of credit sales. We also incurred a considerable
increase in integration costs associated with the
comparatively large number of smaller companies acquired in
the first half of this year and in the latter part of 1998.
The net cash flow from operating activities over the period
was £39.0 million, well ahead of the £27.3 million in the
first half of last year. A total of £197.7 million was
invested in the purchase of businesses. The acquisition of
Keyline was financed by a £200 million five year borrowing
facility, provided by a syndicate led by HSBC Investment Bank
plc and Commerzbank AG. This comprised a term loan facility
of £150 million and a revolving credit facility of £50
million, £180 million of the total facility having been drawn
down at 30 June. The rate of interest on these borrowings has
been fixed at 6% until May 2002. Net debt at 30 June 1999 was
£142.7 million compared with net cash of £31.1 million at 31
December 1998.
A project which was initiated in 1996 to ensure that any
necessary system modifications were planned and completed in
time to achieve year 2000 compliance is on schedule. All
business critical systems are now compliant, having been the
subject of a comprehensive testing programme. The cost of this
project has not been material to the group.
Greater consumer confidence in recent months has led to an
increase in the demand for houses. The level of total
property transactions has reversed the pattern of decline seen
throughout 1998 and the seasonally adjusted figure for July
was the highest for some years. New housing starts have also
begun to increase and house prices are rising. Overall there
is a gradual improvement in construction activity and we view
the future for our enlarged group with confidence.
A Travis
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months 30 June 1999 Six months
Year
Continuing 30 June 31 Dec
£'000 operations Acquisitions Total 1998 1998
(Reviewed) (Reviewed) (Reviewed) (Reviewed) (Audited)
Turnover 322,842 35,921 358,763 304,451 623,078
====== ====== ====== ====== ======
Operating
Profit
Before
Reorganisation
Costs
And
Amortisation
Of
goodwill 34,617 2,314 36,931 27,960 61,838
Reorganisation
costs - (1,668) (1,668) (3,200) (3,200)
Amortisation
of goodwill (336) (485) (821) (176) (481)
------ ------ ------ ------ ------
Operating
Profit
After
Reorganisation
costs and
amortisation
of goodwill 34,281 161 34,442 24,584 58,157
Profit on
sale of
properties 115 - 115 757 923
------ ------ ------ ------ ------
Profit on
Ordinary
activities
before
interest 34,396 161 34,557 25,341 59,080
====== ======
Net interest
(payable)/
receivable (203) 776 1,501
------ ------ ------
Profit on
ordinary activities
before taxation 34,354 26,117 60,581
Tax on profit on
ordinary activities (10,869) (7,850) (18,758)
------ ------ ------
Profit on ordinary
Activities
after taxation 23,485 18,267 41,823
Dividends paid
and proposed (4,536) (3,985) (12,692)
------ ------ ------
Retained profit
transferred to
reserves 18,949 14,282 29,131
====== ====== ======
Earnings per share
Basic 22.4p 17.4p 39.9p
Diluted 22.3p 17.3p 39.8p
Before reorganisation
costs, amortisation of
goodwill and profit
on sale of properties 24.1p 19.0p 41.6p
====== ====== ======
Dividend per share 4.3p 3.8p 12.1p
====== ====== ======
CONSOLIDATED BALANCE SHEET
£'000 30 June 1999 30 June 1998 31 Dec 1998
(Reviewed) (Reviewed) (Audited)
Fixed assets
Tangible assets 149,420 92,171 96,329
Intangible
assets -
goodwill 119,625 10,801 12,927
Investments 3,251 3,387 3,387
------ ------ ------
272,296 106,359 112,643
------ ------ ------
Current assets
Stocks 120,147 82,774 82,868
Debtors 193,319 116,090 111,294
Properties held
for resale 1,396 689 554
Cash at bank and in 37,689 23,838 31,730
hand
------ ------ ------
352,551 223,391 226,446
------ ------ ------
Creditors: amounts falling due
within
one year (207,156) (128,627) (122,469)
------ ------ ------
Net current assets 145,395 94,764 103,977
------ ------ ------
Total assets less
Current
liabilities 417,691 201,123 216,620
Creditors: amounts falling due
after
more than one
year (180,132) (247) (206)
Provisions for
liabilities and
charges (2,197) (493) (890)
------ ------ ------
235,362 200,383 215,524
====== ====== ======
Capital and reserves
Called up share
capital 10,519 10,480 10,489
Share premium
account 16,774 15,595 15,915
Revaluation
reserves 7,770 7,617 7,776
Profit and
loss account 200,299 166,691 181,344
------ ------ ------
Total equity
shareholders'
funds 235,362 200,383 215,524
====== ====== ======
CONSOLIDATED CASH FLOW STATEMENT
Six months Six months Year
£'000 30 June 1999 30 June 1998 31 Dec 1998
(Reviewed) (Reviewed) (Audited)
Net cash inflow
From operating
activities 38,985 27,265 66,424
------ ------ ------
Returns on investments and servicing
of finance
Interest received 838 746 1,581
Interest paid (259) (46) (127)
------ ------ ------
Net cash inflow for returns on
investments and
servicing of
finance 579 700 1,454
------ ------ ------
Taxation
UK corporation
tax paid
(including A.C.T.) (672) (3,344) (14,682)
------ ------ ------
Capital expenditure
and financial
investment
Purchase of tangible
fixed assets (7,909) (7,065) (13,121)
Receipts from
sales of tangible
fixed assets 710 1,535 2,374
Sale of current
asset investments - 1 -
------ ------ ------
Net cash outflow for
capital expenditure
and financial
investment (7,199) (5,529) (10,747)
------ ------ ------
Acquisitions and disposals
Purchase of business
undertakings (195,232) (17,488) (26,601)
Net overdrafts
acquired with
business
undertakings (2,441) (3,102) (2,843)
------ ------ ------
Net cash outflow
for acquisitions
and disposals (197,673) (20,590) (29,444)
------ ------ ------
Equity dividends
paid (8,719) (8,066) (12,049)
------ ------ ------
Cash (outflow) /
inflow before
use of liquid
resources
and financing (174,699) (9,564) 956
Management of liquid resources
Cash inflow from
short term
deposits 8,200 13,000 2,700
------ ------ ------
Financing
Issue of ordinary
share capital 889 216 477
New bank loans 180,000 - -
Repayment of unsecured
loan notes - (298) (2,468)
Capital element
of finance lease
rentals (141) 179 (474)
------ ------ ------
Net cash inflow /
(outflow) from
financing 180,748 97 (2,465)
------ ------ ------
Increase in cash
in the period 14,249 3,533 1,191
====== ====== ======
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Six months Six months Year
£'000 30 June 1999 30 June 1998 31 Dec 1998
(Reviewed) (Reviewed) (Audited)
Shareholders'
funds at 1
January 215,524 185,919 185,919
------ ------ ------
Profit attributable to shareholders
of the Company 23,485 18,267 41,823
Dividends (4,536) (3,985) (12,692)
------ ------ ------
18,949 14,282 29,131
New share capital
subscribed 889 216 477
Goodwill written off on
acquisitions arising
prior to 1998 - (34) (3)
------ ------ ------
Net addition to
shareholders'
funds 19,838 14,464 29,605
------ ------ ------
Shareholders' funds
at 30 June/
31 December 235,362 200,383 215,524
====== ====== ======
* Basis of preparation
The interim financial statements have been prepared on the
basis of the accounting policies set out in the Group's
statutory accounts for the year ended 31 December 1998.
The requirements of Financial Reporting Standard 12
(Provisions, Contingent Liabilities and Contingent Assets) are
being implemented in the current year and have been reflected
in this statement. Implementation of this Standard has no
effect on the figures presented for either the current year or
the prior year.
The financial information for the six months ended 30 June
1999 and 30 June 1998 is unaudited and does not constitute
statutory accounts as defined in section 240 of the Companies
Act 1985. This information has been reviewed by Deloitte &
Touche, the Group's auditors, and a copy of their review
report appears on page 11 of these financial statements.
The financial information for the year ended 31 December 1998
is extracted from the audited accounts for that period. The
auditors' report on those accounts was unqualified and did not
contain a statement under s237(2) or (3) of the Companies Act
1985.
* Statement of total recognised gains and losses
The Group has no recognised gains or losses other than those
included in the profit and loss account above.
* Taxation
The tax charge on ordinary activities for the six months ended
30 June 1999 has been calculated at the rate which it is
expected will apply for the year ended 31 December 1999.
* Earnings per share
Six months Six months Year
30 June 1999 30 June 1998 31 Dec 1998
Basic earnings per share are calculated from the
following ratio:
Profit on ordinary
Activities
after taxation £23,485,000 £18,267,000 £41,823,000
Average number
of shares
in issue 104,997,037 104,739,255 104,783,393
Diluted earnings per share
are calculated from the
following ratio:
Profit on ordinary
activities
after taxation £23,485,000 £18,267,000 £41,823,000
Average number
of shares
including
outstanding
options 105,435,475 105,319,166 104,984,527
Earnings before reorganisation costs, amortisation of goodwill
and profit on the sale of properties are presented in addition
to the basic earnings per share calculated in accordance with
FRS3 and FRS14 since, in the opinion of the Directors, this
presents a better like-for-like comparison of the earnings of
the Group between the relevant periods.
Basic earnings per share may be reconciled to earnings per
share before reorganisation costs, amortisation of goodwill
and profit on the sale of properties as follows:
Six months Six months Year
Pence 30 June 1999 30 June 1998 31 Dec 1998
Earnings per share
before reorganisation
costs, amortisation of
goodwill and profit
on the sale of
properties 24.1p 19.0p 41.6p
Reorganisation
costs (1.1)p (2.1)p (2.1)p
Amortisation
of goodwill (0.7)p (0.2)p (0.5)p
Profit on
sale of
properties 0.1p 0.7p 0.9p
-------- -------- --------
Basic earnings
per share -
FRS 3 basis 22.4p 17.4p 39.9p
===== ===== =====
* Dividend per share
The interim dividend of 4.3 pence (net) per ordinary share
will be paid on 1 November 1999 to shareholders on the
register on 8 October 1999. The shares will be quoted ex
dividend on 4 October 1999.
* Intangible assets - goodwill
The movement of goodwill for the six months ended 30 June 1999
may be summarised as follows:
£'000
At 1 January 1999 12,927
Amount arising from acquisitions completed
during the period 107,519
Amortised during the period (821)
------
At 30 June 1999 119,625
=====
* Purchase of business undertakings
The following table summarises the acquisitions made during
the six months ended 30 June 1999. In certain cases, the
consideration is subject to adjustment and includes net
borrowings acquired.
Effective date Company / business Number
of of
Acquisition branches £'000
Keyline Builders
4 June 1999 Merchants Limited 101 81,531
2 companies and
Various 9 businesses 20 7,082
------ ------
Provisional fair value of net
assets acquired 121 88,613
Goodwill 107,519
===== ------
Total amount payable 196,132
=====
The above figures are provisional insofar as the fair values
of the fixed assets (and in particular the properties) and
certain other items are still subject to detailed review.
* Borrowings
The acquisition of Keyline Builders Merchants Limited was
financed by a new £200 million borrowing facility for five
years provided by a syndicate led by HSBC Investment Bank plc
and Commerzbank AG. This facility comprised a term loan of
£150 million and a revolving credit of £50 million. The rate
of interest on these borrowings has been fixed at 6% until May
2002.
* Net cash flow from operating activities
Six months Six months Year
£'000 30 June 1999 30 June 1998 31 Dec 1998
Operating profit
before
reorganisation
costs and
amortisation of
goodwill 36,931 27,960 61,838
Reorganisation
costs (369) (1,723) (2,740)
Depreciation and
amounts written
off fixed assets 5,309 4,296 8,901
Profit on sale
of fixed assets
and investments (131) (210) (520)
Increase in
stocks (5,620) (7,329) (5,764)
Increase in
debtors (22,449) (9,185) (2,985)
Increase in
creditors 25,314 13,456 7,694
------ ------ ------
Net cash inflow
from operating
activities 38,985 27,265 66,424
====== ====== ======
* Reconciliation of cash flow to movement in net (debt) / cash
Six months Six months Year
£'000 30 June 1999 30 June 1998 31 Dec 1998
Net cash at
1 January 31,122 30,255 30,255
------ ------ ------
Increase in cash
in the period 14,249 3,533 1,191
New borrowings (180,000) - -
Cash outflow
to repay debt - 298 2,468
Cash inflow
from short
term deposits (8,200) (13,000) (2,700)
Decrease /
(increase)
in finance
leases 141 (179) (92)
------ ------ ------
Movement in
net (debt)
/ cash (173,810) (9,348) 867
------ ------ ------
Net (debt) /
cash at 30
June / 31
December (142,688) 20,907 31,122
====== ====== ======
Copies of the interim report will be sent to shareholders and
made available to the public at the Company's registered
office, Lodge Way House, Harlestone Road, Northampton, NN5 7UG.
Independent Review Report to Travis Perkins plc
Introduction
We have been instructed by the Company to review the financial
information set out on pages 4 to 10 and we have read the
other information contained in the interim report and
considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of, and has been
approved by, the directors. The Listing Rules of the London
Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be
consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained
in Bulletin 1999/4 issued by the Auditing Practices Board. A
review consists principally of making enquiries of group
management and applying analytical procedures to the financial
information and underlying financial data, assessing whether
accounting policies and presentation have been consistently
applied unless otherwise disclosed. A review excludes audit
procedures such as test of controls and verification of
assets, liabilities and transactions. It is substantially
less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly, we do not express an
audit opinion on the interim financial information.
Review Conclusion
On the basis of our review, we are not aware of any material
modifications that should be made to financial information as
presented for the six months ended 30 June 1999.
Deloitte & Touche 8 September 1999
Chartered Accountants
St John's House
East Street
Leicester LE1 6NG
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