Travis Perkins plc · LSE:TPK
Travis Perkins — Investor Day (September 2021)
81 slides from Travis Perkins's investor day presentation, Sep 29, 2021
Slide 1: Building for the future
Building for the future 29 September 2021
Slide 2: Chair's welcome and early perspective
Chair’s welcome and early perspective Getting to know the businesses has revealed many strengths: • Powerful culture and Growth prospects are healthy phenomenal colleagues with the market expanding and our businesses gaining • Deep customer relationships share The Group has proved resilient and We m
Slide 3: Agenda for today
Agenda for today 01 WELCOME AND INTRODUCTION 02 OPERATING AND LEADING IN ATTRACTIVE MARKETS 03 LEADING THE EVOLUTION OF THE MERCHANTING MODEL 04 MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE LEVERAGING THE POWER OF THE GROUP • Advancing customer propositions 05 • Aligning te
Slide 4: Welcome and Introduction
Agenda for today 01 WELCOME AND INTRODUCTION Nick Roberts We have delivered on our 2018 agenda Our ambition for the Group is clear Delivery of value to customers and shareholders is at the heart of our strategy 4
Slide 5: Having delivered on our 2018 agenda
01 Having delivered on our 2018 agenda WELCOME AND INTRODUCTION Demerged Wickes Improved digital enablement through Disposed of Plumbing and TP and Toolstation apps Heating Improved the branch network to deliver better Disposed of Tile Giant service Simplify Strengthened the core Reduced annualised
Slide 6: We have set our leading ambition
01 We have set our leading ambition WELCOME AND INTRODUCTION Construction is changing Traditional methods Modern methods We are Products Services broadening the way we work Branch and phone Integrated digital experiences Advice on products Value-added design Collaborative and Leading stand-alone bus
Slide 7: An ambition that will add value for customers and shareholders
01 An ambition that will add value for WELCOME AND INTRODUCTION customers and shareholders Construction is changing Modern methods Better for customers • Deeper relationships We are Services • Value-added services broadening the • Solutions for the future of construction way we work Integrated digit
Slide 8: Operating and leading in attractive markets
02 OPERATING AND LEADING IN ATTRACTIVE MARKETS Nick Roberts We operate and lead across sectors of a large and growing market We are choosing to be an active leader as the market changes The reshaped Group is uniquely positioned to do well 8
Slide 9: The Group operates in a £76bn+ market
02 The Group operates in a £76bn+ market OPERATING AND LEADING IN ATTRACTIVE MARKETS 60bn Other - e.g. Garden • Market CAGR of 50bn Electrical 3.4% 2013-2019 • Overall 40bn P&H Bathrooms construction Lightside materials market 30bn £76bn Insulation / Drylining / Ceilings Civils • £60bn addressable 2
Slide 10: Group end market exposure is majority RMI
02 Group end market exposure is majority RMI OPERATING AND LEADING IN ATTRACTIVE MARKETS Reshaped Group Commercial Total TP • Dependable end markets Market Exposure Domestic & Industrial Infrastructure Group Market driven by: RMI 43% 11% 1% 55% 35% - Housing transactions New 23% 18% 4% 45% 65% - Con
Slide 11: Market fundamentals are strong
02 Market fundamentals are strong OPERATING AND LEADING IN ATTRACTIVE MARKETS Markets recovering well post the Covid-19 period: Construction Output Forecast – New Work New Build Repairs, Maintenance Source: Experian 20% • Average age of housing and Improvements 10% stock c. 70 years • Robust domesti
Slide 12: Market changes are gathering pace
02 Market changes are gathering pace OPERATING AND LEADING IN ATTRACTIVE MARKETS Macro factors Sector-specific factors MACRO FACTORS • Digital and technology • Modern Methods of progress having Construction (“MMC”) are significant impact across beginning to change the Digital ESG all industries indu
Slide 13: We are focusing our efforts on our relationships with customers
02 We are focusing our efforts on OPERATING AND LEADING IN ATTRACTIVE MARKETS our relationships with customers Elevating relationships by the addition of services and new areas of value add Elevating relationships Professional Larger trades contractors and general and builders developers Deepening r
Slide 14: Market changes are shaping customer needs
02 Market changes are shaping customer needs OPERATING AND LEADING IN ATTRACTIVE MARKETS Professional Larger trades contractors and general and builders developers Macro factors Digital tools formulated around trade needs Integrated technology Products and services that Products and services that su
Slide 15: The Group is uniquely placed to respond
02 The Group is uniquely placed to respond OPERATING AND LEADING IN ATTRACTIVE MARKETS Professional Larger trades contractors and general and builders developers Macro factors Digital tools formulated around trade needs Integrated Integrated technology supply Products and services that Products and
Slide 16: A tighter Group well positioned to outperform
02 A tighter Group well positioned to outperform OPERATING AND LEADING IN ATTRACTIVE MARKETS Speaking today Leading businesses Inspiring leaders Specialists in their field Unique network Significant barriers to entry Organised to collaborate 16
Slide 17: Leading the evolution of the merchanting model
03 LEADING THE EVOLUTION OF THE MERCHANTING MODEL Kieran Griffin The TP business is in an excellent position to win share We are deepening customer relationships to expand share of wallet by mining our data, driving digital penetration and enhancing our network We can further elevate our customer re
Slide 18: Travis Perkins supplies a broad range of customers
03 Travis Perkins supplies a broad LEADING THE EVOLUTION OF THE MERCHANTING MODEL range of customers % Revenue General trades Regional National Public Sector Broad and specialists contractors contractors and customers customer and developers housebuilders demographic ~80% ~5% ~5% ~10% Timber & Heavy
Slide 19: Travis Perkins is in an excellent position
03 Travis Perkins is in an excellent position LEADING THE EVOLUTION OF THE MERCHANTING MODEL Significant progress made during the Covid-19 period: Competitive and accessible pricing More competitive Local branch empowerment Commercial deals simplified Bespoke apprenticeship and colleague training in
Slide 20: TP has significant growth opportunities
03 TP has significant growth opportunities LEADING THE EVOLUTION OF THE MERCHANTING MODEL More detail in subsequent slides Improved network (branch and delivery capability) Managed Services Hire of equipment Value-added hire Kitchen design & supply service Elevating Kitchen solutions relationships P
Slide 21: Data is driving an enhanced understanding of our customers
03 Data is driving an enhanced understanding LEADING THE EVOLUTION OF THE MERCHANTING MODEL of our customers Customer segments Detailed insight providing opportunities for engagement Professional trades & Value enhancing opportunities to both general builders broaden and deepen relationships 80 Reve
Slide 22: Digital journeys developed for customers and colleagues
03 Digital journeys developed for LEADING THE EVOLUTION OF THE MERCHANTING MODEL customers and colleagues Better for customers Better for colleagues Customer app launched Colleague app launched Trade with TP at a time 106k Improvements to branch and place convenient to Downloads operations customers
Slide 23: Developing the branch proposition to drive market share gains
03 Developing the branch proposition LEADING THE EVOLUTION OF THE MERCHANTING MODEL to drive market share gains Larger, more efficient Where possible, branches with range utilise sustainable and delivery products to reduce advantages carbon footprints Larger branches The urban market share provide a
Slide 24: Network supports proposition enhancement with attractive returns
03 Enabling development Network attractive returns on investment supports LEADING THE EVOLUTION OF THE MERCHANTING MODEL proposition enhancement BEFORE Relocation / New branches Redevelopment Capital requirement ~£1.5m ~£0.7m per branch Incremental revenue per ~£7.0m ~£2.6m branch at maturity AFTER
Slide 25: Ambition to grow value-added services
03 Ambition to grow value-added services LEADING THE EVOLUTION OF THE MERCHANTING MODEL Managed • Currently serves public sector domestic RMI market Services • Long-term commitments to customer contracts ~£200m • Potential to extend to other adjacent markets Benchmarx • Integrated into TP with 67 im
Slide 26: Managed Services is a differentiator for our customers
03 Managed Services is a LEADING THE EVOLUTION OF THE MERCHANTING MODEL differentiator for our customers TP Managed Services is a supply chain and procurement partner delivering bespoke solutions to customers Stand-alone managed stores and access to the wider TP branch network Multichannel customer
Slide 27: TP General Merchant – Well positioned for success
03 TP General Merchant – LEADING THE EVOLUTION OF THE MERCHANTING MODEL Well positioned for success In an excellent position Performing well and Significant opportunities to after significant progress taking share in the market drive additional value through during COVID period deepening relationshi
Slide 28: Specialist businesses
03 LEADING THE EVOLUTION OF THE MERCHANTING MODEL Frank Elkins The specialist businesses are market leaders and have delivered excellent performance and returns The businesses are well placed to capitalise on the investment required to make the built environment more energy efficient Opportunities e
Slide 29: Specialist merchants driven by long-term customer partnerships
03 Specialist merchants driven by LEADING THE EVOLUTION OF THE MERCHANTING MODEL long-term customer partnerships Internal drywall, Air conditioning specialist ceilings & insulation 11 branches 36 branches 2017-2019 revenue 2016-2019 revenue CAGR: ~14% CAGR: ~7% Civils & drainage specialist Commercia
Slide 30: The businesses have significant growth potential
03 The businesses have significant growth potential LEADING THE EVOLUTION OF THE MERCHANTING MODEL Branch rollout Robust core residential market Refrigeration Insulation growth to make Decarbonisation of heating buildings more sustainable Technical insulation Robust core residential market Robust co
Slide 31: The need to decarbonise creates opportunities
03 The need to decarbonise creates opportunities LEADING THE EVOLUTION OF THE MERCHANTING MODEL Significant investment required across all sectors driven by the need for higher standards • Domestic spend increasing as Future Homes Standard drives changes to building regulations Regulatory and EPC ra
Slide 32: TF Solutions offers routes to growth in adjacent markets
03 TF Solutions offers routes to growth LEADING THE EVOLUTION OF THE MERCHANTING MODEL in adjacent markets A leading provider of air conditioning products to SME installers operating from 11 c. 10,000 ft2 branches TODAY c.£25m revenue at c.8% operating margin 2024 target revenue > £100m Optimal esta
Slide 33: Value-added services bring differentiation and margin opportunities
03 Value-added services bring differentiation LEADING THE EVOLUTION OF THE MERCHANTING MODEL and margin opportunities Early project engagement Design capability Elevating ESG expertise relationships Supply chain solutions Larger Digital assets (BIM) contractors and developers Delivery management Sup
Slide 34: Design to Use Case Study
Design to Use Case Study Angela Rushforth 34
Slide 35: BSS Design to Use - Value-adding customer solutions
03 BSS Design to Use - LEADING THE EVOLUTION OF THE MERCHANTING MODEL Value-adding customer solutions Customer Challenges Advise • Lack of design capability • Design inaccuracies • Optionality for design/ESG solutions Elevating Design relationships • Lack of clarity around scope and project integrit
Slide 36: BSS Design to Use - Expanding our role in the value chain
03 BSS Design to Use - LEADING THE EVOLUTION OF THE MERCHANTING MODEL Expanding our role in the value chain Advise Elevating Design relationships Order BSS Tomorrow Fulfil Deepening Support relationships Service 36
Slide 37: Specialists - further levers to drive value
03 Specialists - further levers to drive value LEADING THE EVOLUTION OF THE MERCHANTING MODEL The success of the Group’s specialist merchants As the construction industry changes, is driven by long-term partnerships developed further opportunities to differentiate and with customers and suppliers an
Slide 38: Maximising the long-term potential of Toolstation in the UK and Europe
MAXIMISING THE LONG-TERM POTENTIAL 04 OF TOOLSTATION IN THE UK AND EUROPE James Mackenzie and Alan Williams Toolstation is a brilliant business - offering customers simple, convenient and multichannel access to products In the UK, it is well set for growth to £1bn (2024) and beyond At maturity, it w
Slide 39: A model designed to address customer needs
04 A model designed to address customer needs MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE Professional trades and general builders 25,000 products Key customer needs Depth and breadth of range 13,000 Available High availability Digitally-led next day proposition Convenient
Slide 40: Toolstation UK has significantly outperformed the market
04 Toolstation UK has significantly MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE outperformed the market Levers of growth 01 Network Toolstation UK revenue (£m) • Accelerated branch opening plan, facilitated 2018 > 2020 through smaller footprint branches CAGR: ~26% 02 Propo
Slide 41: A clear path to reach £1bn of sales by 2024
04 A clear path to reach MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE £1bn of sales by 2024 • Significant market >£1bn share growth by 2024 ~650 branches (~3% pts) Further network Toolstation UK revenue (£m) growth • Further growth Trade Focus opportunities post Proposition
Slide 42: Future growth comes from four key areas
04 Future growth comes from four key areas MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE 01 Further network growth • ~60 new branches annually to around 650 • Potential for smaller format branches and collection points • Blending new delivery capacity with local fulfilment 0
Slide 43: Digital penetration will accelerate further
04 Digital penetration will accelerate further MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE Digital channels have grown significantly during the Covid-19 period: Direct New 500,000ft2 DC Digital sales participation +30% fulfilment +52% in Northampton volume Key levers to fu
Slide 44: Clear line of sight to high single-digit operating margin at maturity
04 Clear line of sight to high single-digit MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE operating margin at maturity 01 02 03 Once mature, branches Recently opened branches Supply chain and back- generate a contribution benefit from continuous office costs are mainly margi
Slide 45: Toolstation Europe Video
04 45 MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE Toolstation Europe Video
Slide 46: Toolstation Europe will follow a similar route
04 Toolstation Europe will follow a similar route MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE Over time, expect businesses to be similar to UK in revenue, gross margin and net margin trajectory Market Size Business Potential Branches (€bn) Maturity relative to UK Today • E
Slide 47: Toolstation offers an exciting prospect for growth
04 Toolstation offers an MAXIMISING THE LONG-TERM POTENTIAL OF TOOLSTATION IN THE UK AND EUROPE exciting prospect for growth Toolstation UK offers a compelling case: • Clear route to £1bn+ business • Drivers of revenue are clear and well understood • High single-digit margins at maturity Toolstation
Slide 48: Break
Break 48
Slide 49: Leveraging the power of the Group
LEVERAGING THE POWER OF THE GROUP • Advancing customer propositions 05 • Aligning technology to propositional development • Framing our long-term future Nick Roberts The Group’s collection of market-leading businesses facilitates the development of unique customer propositions Aligning the Group’s t
Slide 50: Two unique areas to enhance customer propositions
05 Two unique areas to enhance LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions customer propositions Elevating relationships by the addition of services and new areas of value add Elevating relationships collaboration Innovative solutions Professional Larger for customers working
Slide 51: Leveraging the customer overlap
05 Leveraging the customer overlap LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions TP customer spend ~4% of current TP customer with fixed-price spend is with Toolstation lightside merchants ~8% is via other fixed-price merchants Through leveraging data, cross marketing and enhan
Slide 52: To maximise the potential of our market-leading businesses
05 To maximise the potential of our LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions market-leading businesses PRODUCT TYPE Lightside Heavyside Delivered FULFILMENT METHOD 52
Slide 53: Lightside expertise from Toolstation already helping TP
05 Lightside expertise from Toolstation LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions already helping TP PRODUCT TYPE Lightside Heavyside • Trial underway with 2,000 Toolstation SKUs Delivered live in TPGM digital channels • Plans to broaden to other categories FULFILMENT METHO
Slide 54: Medium-term potential for Toolstation to capture heavyside orders
05 Medium-term potential for Toolstation LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions to capture heavyside orders PRODUCT TYPE Heavyside • Current capability being upweighted by delivery management Delivered • Delivery only branch in trial FULFILMENT METHOD • Further deploymen
Slide 55: Helping customers navigate a changing industry
05 Helping customers navigate a changing industry LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions Customer needs Our responses More efficient use of materials Introduce new solutions to modular builders Offsite manufacturing reduces waste to ensure that the right materials are av
Slide 56: Staircraft adding significant capabilities to the Group
05 Staircraft adding significant LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions capabilities to the Group Minority share acquired in 2015 Full control effective from Q4 2021 Market-leading proposition for national, offsite and regional housebuilders. Fully integrated stair and f
Slide 57: An intelligent approach to leveraging scale
05 An intelligent approach to leveraging scale LEVERAGING THE POWER OF THE GROUP - Advancing customer propositions Tailored propositions Group advantages 01 Specialist sales force Enhanced customer propositions 02 Flexible combinations of assets Commercial proposition 03 Alignment and collaboration
Slide 58: Aligning technology to propositional development
LEVERAGING THE POWER OF THE GROUP • Advancing customer propositions 05 • Aligning technology to propositional development • Framing our long-term future Phil Tenney 58
Slide 59: Aligning technology to customer segments
05 Aligning technology to customer segments LEVERAGING THE POWER OF THE GROUP - Aligning technology to propositional development Smaller Managed professional trades relationships Approach Benefits Customer Face to Integrated Branch Online proposition face services Customer Delivery and inventory man
Slide 60: Modern technology delivery methods are being used
05 Modern technology delivery methods LEVERAGING THE POWER OF THE GROUP - Aligning technology to propositional development are being used From To Fewer major programmes More agile products Capex spend plus depreciation More opex - SaaS payments Higher risk implementations Lower risk go-live (test an
Slide 61: Framing our long-term future
LEVERAGING THE POWER OF THE GROUP • Advancing customer propositions 05 • Aligning technology to propositional development • Framing our long-term future Emma Rose 61
Slide 62: Embracing the opportunity to shape our industry
05 Embracing the opportunity to shape our industry LEVERAGING THE POWER OF THE GROUP - Framing our long-term future Unique position at the heart of the industry Customers Able to shape the agenda and lead through example Colleagues Specifiers Leadership role provides competitive advantage Embracing
Slide 63: Guided by a clear purpose and stretching goals
05 Guided by a clear purpose and stretching goals LEVERAGING THE POWER OF THE GROUP - Framing our long-term future Group Purpose We’re here to help build better communities and enrich lives Group Ambition - Leading Partner to the Construction Industry Helping to change Decarbonising Developing the c
Slide 64: Committed to reducing our environmental impact
05 Committed to reducing our environmental impact LEVERAGING THE POWER OF THE GROUP - Framing our long-term future Net Zero Carbon • Decarbonising fleet of over 4,000 vehicles for Scopes 1 and 2 by • Decarbonising estate of over 1,300 buildings 2035 (80% reduction, Net Zero Carbon 20% offset) • Help
Slide 65: Thriving culture, colleagues and communities
05 Thriving culture, colleagues and communities LEVERAGING THE POWER OF THE GROUP - Framing our long-term future sit at the heart of our future success • Advancing our safety culture through a risk focus Everybody • Supporting physical, mental and financial wellbeing home safe and well • Collaborati
Slide 66: Delivering attractive financial outcomes
06 DELIVERING ATTRACTIVE FINANCIAL OUTCOMES Alan Williams 66
Slide 67: A compelling investment proposition
06 A compelling investment proposition DELIVERING ATTRACTIVE FINANCIAL OUTCOMES 01 02 03 Reshaped Group more Actions taken to simplify Well positioned to take stable and predictable with processes, speed up decision advantage of new market competitively advantaged, making and address the opportuniti
Slide 68: Group well set for medium term outperformance
06 Group well set for medium term outperformance DELIVERING ATTRACTIVE FINANCIAL OUTCOMES • Toolstation a growing component of the Group Revenue Ahead of the market • Opportunities to win share through deeper customer relationships • Extension into value-added services Gross • Segmental mix benefit
Slide 69: Strong underlying cash conversion
06 Strong underlying cash conversion DELIVERING ATTRACTIVE FINANCIAL OUTCOMES Continue to build on strong recent performance driven by working capital management Merchanting working capital as a Investment in network and growth proportion of sales has been relatively results in lower cash conversion
Slide 70: Clear capital allocation priorities aligned to strategy
06 Clear capital allocation priorities aligned to DELIVERING ATTRACTIVE FINANCIAL OUTCOMES strategy Strategic Priorities Maintenance ~35% ~50% Toolstation UK & Maintaining Europe expansion a modern, sustainable Capex guidance1 fleet 2022 c. £125m TPGM network Network improvements IT estate Hire port
Slide 71: Value-adding M&A through bolt-on 'buy and build' strategy
06 Value-adding M&A through bolt-on DELIVERING ATTRACTIVE FINANCIAL OUTCOMES ‘buy and build’ strategy Elevating relationships Potential to exploit the Group’s scale advantage and to provide further opportunities to elevate or deepen Deepening relationships. relationships 71
Slide 72: Appreciating property portfolio releases profit and cash
06 Appreciating property portfolio DELIVERING ATTRACTIVE FINANCIAL OUTCOMES releases profit and cash 2010-2021 • Average of c. £40m cash-inflow from property Market value has grown by over £500m disposals per annum fully funding acquisitions - NBV has grown by ~£90m despite cash receipts of over £13
Slide 73: Highly achievable leverage targets
06 Highly achievable leverage targets DELIVERING ATTRACTIVE FINANCIAL OUTCOMES 4.0x • Significant reduction in Group leverage since 2012 with 3.3x material reduction in 2021 3.0x driven by portfolio actions. 3.0x 2.8x 2.8x 2.8x 2.7x 2.7x 2.7x Net debt2 / EBITDA1 2.5x • Target leverage of 1.5x - 2.0x
Slide 74: Repeatable model focused on delivering sustainable TSR
06 Repeatable model focused on delivering DELIVERING ATTRACTIVE FINANCIAL OUTCOMES sustainable TSR Merchanting leadership and Toolstation expansion driving above Attractive earnings growth market growth Strong cash conversion from disciplined working capital Ordinary dividend Robust balance manageme
Slide 75: Wrap-up and Q&A
07 WRAP-UP AND Q&A Nick Roberts 75
Slide 76: Summary
07 Summary WRAP-UP AND Q&A 01 02 03 The construction The Group is well Elevating and sector is changing, positioned to adapt deepening customer driven by both macro quickly to these relationships will be key and sector-specific changing conditions to win factors 76
Slide 77: Summary
07 Summary WRAP-UP AND Q&A 04 05 06 Our businesses all We take our role as We believe our strategy have clear plans to a leader in the sector will grow earnings and enable future growth seriously – we will cash which with and further value can help to create a more disciplined investment, be added t
Slide 78: We're here to help build better communities and enrich lives
07 We’re here to help build better WRAP-UP AND Q&A communities and enrich lives Purpose We’re here to help build We have a differentiated better communities and enrich lives and clear purpose with a Ambition stretching ambition Leading Partner to the Construction Industry Collaborating to add value
Slide 79: Appendix
Appendix 79
Slide 80: The Group Leadership Team
The Group Leadership Team Nick Roberts Alan Williams Frank Elkins Phil Tenney Robin Miller Emma Rose CEO CFO COO CITO General Counsel and CHRO Joined 2019 Joined 2017 Joined 2003 Joined 2021 Company Secretary Joined 2020 Experience: Experience: Experience: Experience: Joined 2018 Experience: Previou
Slide 81: Group ESG framework
Group ESG framework gustainable Busines, Safety & Wellbeing 81 Travis Perkins *