Travis Perkins plc · LSE:TPK
Travis Perkins — Investor Day (November 2014)
101 slides from Travis Perkins's investor day presentation, Nov 27, 2014
Slide 1: Operational Briefing
OPERATIONAL BRIEFING
Slide 2: Agenda
Agenda Group strategy John Carter / Tony Buffin p3 General Merchanting Arthur Davidson p20 Contracts Frank Elkins p35 Plumbing & Heating Paul Tallentire p48 Consumer Simon King / Tony Buffin p60 IT & Supply Chain Norman Bell / Robin Proctor p79 Wrap up John Carter p93 Appendices p97 Travis Perkins ®
Slide 3: Levers of value creation
|evers of value creation Portfolio Scale management Optimising advantage * Streamlined central Customer network * Supply chain functions innovation ° TP expansion & investment * Devolved modernisation ° Leverage property management * Improved value * Wickes national footprint capability responsibili
Slide 4: Strength as a Group - unique breadth in the UK
Strength as a Group - unique breadth in the UK Travis Perkins ® I £1.8bn sales, ~15% share £1.3bn sales, ~15% share £1.0bn sales, ~20% share £1.3bn sales, <10% share (Pfene Key Wickes SUPPLIES Puanbing Tad Supoos 6660 TOOLSTATION CFOPRD Pipeline & Heating Solutions F&P Wholesale LJ = Kitchone ard Jo
Slide 5: Strength as a Group - exploiting scale in the UK
Strength as a Group - exploiting scale in the UK Travis Perkins® I General - Merchanting Supply Chain - fast & efficient available range Commercial — better sourcing & product innovation IT — enabling strategy & efficiency Property — enterprise wide network planning HR & Finance Travis Perki ns ae 2
Slide 6: Medium-long term sustainable RMI growth
Medium-long term sustainable RMI growth Smaller 0 families driving ta aX. 27.8m 225,000 new ; homes households 3 a” across the per year eve country Travis Perkins ®
Slide 7: RMI performing as expected
RMI performing as expected +9pt Site reservations (12)pt +6pt Mortgage approvals (9)% (0.3)% Housing transactions +5% Flat +9% Housing prices Definitions disclosed in Appendix Il Travi S Pe rki ns ae 2014 Operational Briefing ~ 27 November 2014 7
Slide 8: Still early in the recovery of the housing market
Still early in the recovery of the housing market 140 =P operty Transactions ===Base interest rates fo 3 R12 monthly housing transaction volume 40 2005 2007 2009 2011 2013 Source: HM Revenue & Customs / Bank of England, July 2014 Travis Perki ns ae 2014 Operational Briefing ~ 27 Novernber 2014 Base
Slide 9: Our growth not constrained by the market
Our growth not constrained by the market * Majority of the markets we compete in are highly fragmented Market *° Proliferation of small family-owned businesses fragmentation Our businesses are #1 or #2 in each of our markets, but with relatively low rnarket shares * Sourcing & supply chain: sourcing
Slide 10: Sustainable medium-term revenue growth
Sustainable medium-term revenue growth ° Low-single digit market volume 8% growth assumed ° Low levels of inflation ” s ae ° Structural advantages & investment opportunities generate consistent market outperformance Sales growth pa. S oT 0% ~6-7% revenue growth pa. Market Inflation Outper- New volum
Slide 11: Significant achievements in our first year
Significant achievements in our first year Customer innovation * Further price investment to grow share * Heavyside range extensions * Promotional & branded ranges into Wickes * City Plumbing format conversions * New TP format trials underway ° Wickes Click & Collect launched Travis Perkins ® Optimi
Slide 12: Confidence supports additional capital deployment
Confidence supports additional capital deployment Examples 2014E 2015 Extending Strong = New branches Can RAD stores & implants leadership returns Good * New formats. returns * Heavyside range centres £15m £30-40m @ Investing to grow Re-engineering & Range of * IT systems £25m £20-30m infrastructure
Slide 13: Illustrating value creation from capital deployment: trade park
Illustrating value creation from capital deployment 4 trade park J average* @ravis Pon as Annualised year 1 EBITDAR £2.0m Lease adjusted investment £92m Annualised year 1 returns 22% Returns after 5-year maturity tt ° Capital deployment a key lever of value creation Travis Perkins © Provides confide
Slide 14: Small bolt-on acquisitions to support organic growth
Small bolt-on acquisitions to support organic growth Geography * Strategic investments to protect supply chain New categories * Smaller, independent * Share in categories which bypass distribution ° Access specialist markets merchants for regional * Not a focus e infill where valuations attractive F
Slide 15: Building a stronger balance sheet through earnings
Building a stronger balance sheet through earnings Six months ended Medium term 30 June guidance H1 2014 H1 2013 A Net debt - £297m = £406m_—E(109)m Lease adjusted debt - £1,806m £1854m £(48)m g LA Gearing - 441% 488% (47Iopt IL Fixed charge cover 35x 3.0x 2.8x 02x t LA Debt: EBITDAR 2.5x 2.8x 3.2x
Slide 16: Underlying guidance for 2014 unchanged
Underlying guidance for 2014 unchanged ¢ EPS in-line with consensus ° Required to recognise a number of exceptional charges & income items ° Minimal cash impact Travis Perkins ® E ted tional it 2014 2014 2015 2015 (em). ee exceptional tems cash EBITA cash EBITA impact impact impact impact Wickes sto
Slide 17: Encouraging outlook for 2015
Encouraging outlook for 2015 ° Low double digit EBITA growth (incl. ~£15m opex investment) ° Improving inflation outlook ° Property profits of ~£20m (2014: ~£20m) ° Effective tax rate moving towards ~20% (2014: ~21%) * Dividend growth above EPS - medium-term range (2.50x-3.25x) Travis Perkins ® ¥ Op
Slide 18: Consistent medium term guidance
Consistent medium term guidance ° Continue to outperform in majority of our markets * Good operating margin prospects for the Group: - General Merchanting sustain sector leading margins - Plumbing & Heating good growth - Contracts good growth - Consumer good growth Targeting sustainable double digit
Slide 19: Questions
‘ | QUESTIONS. |
Slide 20: General Merchanting
GENERAL —_ MERCHANTING.
Slide 21: Key messages
Key messages Fst © The general merchanting market remains fragmented with a compelling consolidation opportunity Investment in new branches and modernising the Travis Perkins operating model will drive continued share gains Travis Perkins ® 2014 Operational Briefing ~ 27 November 2014 al
Slide 22: Travis Perkins landscape
Travis Perkins — landscape © ° Market volume growth expected to continue, although moderate ° Cost price inflation to remain, 2015 expected to be at similar level to 2014 ° Customers are being given increased choice * Our competition is three pronged: local independents, national merchants and fixed
Slide 23: Levers of value creation
|evers of value creation Scale Optimising advantage network * Supply chain investment Customer innovation * Product development * TP expansion & modernisation ° Leverage property * Wickes national footprint capability * Group sourcing ° Plumbing & Heating benefit ener;its format clarity * Implants i
Slide 24: Modernising the Travis Perkins model
Modernising the Travis Perkins model Expand the network i, formats sonneme, Serre Toolhire expe Enhanced Sales & Profit drivers seneeneny POrerrerrrer rere ey Multi-channel development -ategory management & pricing Enhanced IT capability gueeneeneneae «Covered today = PPetrrrrreriig a ao © c ui ~" R
Slide 25: Modernising the Travis Perkins business - People
Modernising the Travis Perkins business - People ® Our people make the difference ° We need to protect our heritage and culture, but be receptive to change ° Our people understand the value of customer relationships ° Fewer, better people operating safely * Continuous improvement with cost focus Tra
Slide 26: Modernising TP's pricing architecture
Modernising TP’s pricing architecture Enabled by: ° Better systems Improving Price Perception ° Better analytics and customer behaviour insights ° Investment in category management team Travi S Pe rki ns co) 2014 Operational Briefing - 27 November 2014 26
Slide 27: Modernising range & space allocation
Modernising range & space allocation ° Better merchandising disciplines ° Extended range, c.1000 additional SKU’s ° Clearer signage and navigation ° Safer environment ° Making it easier for customers — Zonal shop Travis Perkins ®
Slide 28: Modernising range & space allocation
Modernising range & space allocation ° Three branch pilot underway ° In-branch availability improved ° Next day availability on further extended range ° Early results encouraging ° Wider trial commencing in 2015 e St Pancras benefits from learnings Travis Perkins ® 20H Optional tig 27
Slide 29: Modernising the heavyside range
Modernising the heavyside range ° Heavyside range extended by >2,000 SKU's ° Next day availability on a broader range ° Range conformity enables multi- channel promises © Reduced reliance on branch-to- branch stock transfers ° Early sales uplifts warranting continued investment / November 2014 Travi
Slide 30: Modernising TP's multi-channel capabilities
Modernising TP’s multi-channel capabilities * Online adds to current multi- channel ordering methods ° Initial focus on existing customers — Stock availability, including extended range and near-branch availability — Click and collect available in 2015 — Delivery time of choice ° Non-account custome
Slide 31: Benchmarx, a growth story
BENCHMARX Benchmarx, a growth story sachet ° Continued network expansion plan ° Combination of group implants ~F T and standalone branches ie ° ‘Selection Centre’ formats proving a differentiator ° Group sourcing improvements and range consolidation underway Travis Perkins ® 201 Ona
Slide 32: Illustrating value creation from capital deployment
Illustrating value creation from capital deployment New TP Branch Annualised year 1 EBITDAR £0.5m Lease adjusted investment £2.2m Annualised year 1 returns >20% Returns after 5-year maturity 4t ° Capital deployment a key lever of value creation © Provides confidence to continue Travis Perki ns ae 20
Slide 33: General Merchanting ambition
General Merchanting ambition Beni an anes © Measure Current Medium-term ambition Network expansion 648 5-15 new p.a. Like-for-like sales 3.5% 1-4% pa. outperformance Operating margin Sector Sustain improvement prospects leading Capital expenditure £40-50m £40-60mpa. 0 Add 200- LAROCE 17% 300 bps Tra
Slide 34: Welcome to your local
Welcome to Your local | © Travis Perkins TEL: 01902 604555 FAX: 01902 637581
Slide 35: Contracts
Slide 36: Key messages
Key messages weg cece CCF New Division C1) performing Nell Contracts Division created just 12 months ago to provide a better service to customers and generate synergies Investment Investment in new branches, better ranges, enhanced account / ejoleelatvlaitiesme Sales teams and improved supply chain
Slide 37: Unique ability to support throughout a project
Unique ability to support throughout a project 666 SIG Pipeline & Heating Solutions > Keyline 4 Se PIPE gg DRAIN @ wees pela) civic PL covrer ( (= JEWSON min INSULATION CIVILS& ay LINTELS Fumease AO(ounnce tansreR INDUSTRIAL Share of competitor > Lifecycle of construction project Travis Perki ns pte
Slide 38: Clear divisional synergies
Clear divisional synergies ° Shared knowledge be — Projects carillinr — Customer contacts [ei KIER — Value engineering LAING O'ROURKE * Order consolidation SKANSKA Shared infrastructure Best practices Central shared functions Group sourcing Travis Perkins ® 014 Operational ring ~ 2 Nove 2014 Solutio
Slide 39: Strong propositions in each business
Strong propositions in each business Keyline f 666 CCF Pipeline & Heating Solutions Pricing Negotiated (tendered & spot-buys) Ranging ~11,000 ~27500 ~2,750 Delivery 95% 80% 90% # branches (4) 65 32 Proprietary brands - BSss iR Ea OR as Travi S Pe rki n Ss co) 2014 Operational Briefing - 27 November
Slide 40: Levers of value creation
Levers of value creation aii” 068 CCF Portfolio management Scale Optimising advantage ° Streamlined central Customer network * Supply chain functions innovation ° TP expansion & investment Davellved! modernisation ° Leverage property management * Improved value * Wickes national footprint capability
Slide 41: Collaboration drives outperformance
Collaboration drives outperformance “ai °8° CCF Growth in insulation Develop BSS Industrial Major presence in offer Partitio ‘ontract pricing & project Category expansion Bory exp management Contracts Deepen sector & Division anch network category specialis optimisation «Covered today = SPrerrrereri
Slide 42: Branch network optimisation
Branch network optimisation wegiy 088 CCF ° Branch coverage an opportunity for CCF ° Delivery capability & capacity is critical ° 16 branches reconfigured between Contracts & TP ° New space in 2015 — 2new &2 relocated CCF branches — 6 new Keyline branches ing - 27 November 2014 42 Travis Perkins ® 2
Slide 43: Pricing & project management
Pricing & project management ° More focused commercial Division Project Tracking teams . Client ° Development of project tracking Architect a . Sub- ° Pricing tools to standardise Contractor customer tiers Main Sub- Contractor Contractor ° Quote follow-up system being oie developed Contractor Travis
Slide 44: Business specific growth agendas
Business specific growth agendas Kes 666 Pipeline & Heating Solutions ° Enhanced sector ° Further growth in specialism industrial sector * New branch format trial ° Leverage newly completed national tool Optimisation & hire network standardisation of civils and drainage range ° Develop smaller forma
Slide 45: Illustrating value creation from capital deployment
Illustrating value creation from capital deployment New CCF Branch Annualised year 1 EBITDAR £0.4m Lease adjusted investment £2.0m Annualised year 1 returns ~20% Returns after 5-year maturity 4t ° Capital deployment a key lever of value creation © Provides confidence to continue Travis Perki ns ae 2
Slide 46: Contracts ambition
Contracts ambition Medium-term Measure Current an ambition . 172 =: 1-2% net space Network expansion branches growth pa. Like-for-like sales 0-3% 1-3% pa. outperformance Operating margin 7% Good improvement prospects Capital expenditure £12m £15-25m pa. Add 200- [ey LAROCE 12% 300bps Travis Perkins
Slide 47: Questions
QUESTIONS. |
Slide 48: Plumbing & Heating
i | “= PLUMBING “. & HEATING
Slide 49: Key messages
Key messages 060 (i, GD Despite recent market fluctuations, the plumbing & heating market has attractive segments to invest in 49
Slide 50: Three core operations in differing market segments
Three core operations in differing market segments PTS) Plumbing Trade Supplies SUPPLIES Pricing Quote driven pricing Variable pricing Formula pricing Small Customers Ranging Variable Delivery 75% 90% 25% # branches 310 10 190 Market position #1 #1 #2 i ] co) 2014 Operational Briefing - 27 Novernber
Slide 51: Market structure warrants redeployment of capital
Market structure warrants redeployment of capital Divisi Market . Current Division Market LAROCE Action revenue exposure growth structure vee’ Other Good Fragmented Good Invest [ore Good Fragmented Good Invest re Good Fragmented Good Invest Plumbing Trade Supplies Reduce capital Heating Low Consolid
Slide 52: Levers of value creation
Portfolio management Levers of value creation Scale Optimising advantage . Customer network * Supply chain innovation ° TP expansion & investment modernisation ° Leverage property *_Improved value * Wickes national footprint capabilit * Extended range * Plumbing & Heating * Product development forma
Slide 53: Share gain through focused customer propositions
Share gain through focused customer propositions Peer ee rere reer yy q PTS / City Plumbing reconfiguration t Supply chain Leverage high ROCE 4PlumbNation efficiencies F&P model ¢ City Heating Spares PTS) Plumbing Trade Supplies n e 5 2 me} 2 Qa i) n L © Yn SUPPLIES Roll-out of Bathroo ™DHS s@irex’
Slide 54: Network reconfiguration - Building the Best
Network reconfiguration — ‘Building the Best’ 3, Operating model 3,20 new enhancements ~380 branches ~190 branches 2. (10) closures stores 1,180. stores conversions ~ I Clearl sn 180 branch Conversions —girsaites overlap customer offer over 2 years 1. (180) conversions ~310 branches 2 (50) closures
Slide 55: Conversions progressing well
Conversions progressing well Conversion * ~60 branch conversions completed to date -13 weeks i +4 weeks ° 40 branches currently ‘in play’ Conversion preparation e ~75 branch conversions Stock management completed by the end of 2014 ° 2new development centres [erartieimers ns e ~50 new bathroom showr
Slide 56: Delivering two targeted propositions in 2016
Delivering two targeted propositions in 2016 [om Local SME business 000 Contract business ° 380 branches in 2016, potential for ° Serviced from 2 primary distribution >400 centres & 5 regional service centres ° To include ~300 bathroom showrooms with overnight dead drop capability & ~200 spares outl
Slide 57: Illustrating value creation from capital deployment
Illustrating value creation from capital deployment Illustrative returns City Plumbing relocation Incremental year 3 EBITDAR £0.1m Incremental lease adjusted investment £0.5m Year 3 returns ~25% Returns after 5-year maturity t ° Capital deployment a key lever of value creation ° Provides confidence
Slide 58: Plumbing & Heating ambition
Plumbing & Heating ambition Medium-term Measure Current an ambition . 5-10 net new Network expansion branches p.a. Like-for-like sales 0-3% 0-3% pa. outperformance Operating margin 35% Good improvement prospects Capital expenditure £10-£20m pa. Add fey LAROCE 7% >250bps Travis Perkins ® 2014 Operati
Slide 59: Questions
‘ | QUESTIONS. |
Slide 60: Consumer
Slide 61: Key messages
Key messages Tue ciant Wickes Structurally Wickes and Toolstation are structurally advantaged with relatively advantaged fewer and smaller stores, enabling rnore focused proposition Wickes Initial improvements in Wickes working well with a new luclasiegeatciieam Management team in place to drive the
Slide 62: New team driving change
New team driving change ° New team in place ° Priority to increase LFL performance — Range, value, communication, service & standards — Format renewal ° Accelerate new store openings ° Targets remain consistent with medium term guidance Travis Perkins ® 2014 Operational Briefing Chief Commercial Off
Slide 63: Levers of value creation
Customer innovation Optimising network * Supply chain ° TP expansion & investment modernisation ° Leverage property *_Improved value * Wickes national footprint capabilit ° Extended range * Plumbing & Heating * Product development format clarity |evers of value creation Scale advantage * Group sourc
Slide 64: Wickes positioned for sustainable growth
Wickes positioned for sustainable growth Wickes Large Mid-size Small Expert Functional § Style-Led . . * ee (® Travis Perkins E REWIX : SCREWFIX } Travis Perki ns ae 2014 Operational Briefing - 27 November 2014 64
Slide 65: Wickes is structurally advantaged
Wickes is structurally advantaged * Only 200 full service Ree stores ‘al * 60+ new store opportunities Property + small average store size (25-30,000 ft2) Wickes ; Va * Focused in-store range Tl Online range extension Strong availability Product ° Selective branded ranges ~ £ Value 2014 re-launch Na
Slide 66: Transforming the customer proposition
Transforming the customer proposition Wickes A Wickes project in every Value for money. We always deliver. Quick, simple & easy. * Refocus product offering based on * Build on multi-channel clear customer needs strengths * Maintain structural price ° National estate coverage advantage with authority
Slide 67: Some early quick wins
Some early quick wins ° Strong sales growth ° |ntroduced more brands ° Fewer & bigger promotions with clearer messaging ° Stronger direct communication with our customers * On-line growth with strong Click and Collect Travis Perkins ® 201 Operational Bring 27 November 20 Wickes BUY 1GET1 FREE Wickes
Slide 68: What we sell - range
What we sell - range Wickes * Categories where * Identifying the * Least profitable * Categories which are Wickes can win products and categories but simple and easy to categories where necessary to shop ° A strong alternative to market leader promotions & value maintain position drive greater footf
Slide 69: What we sell - maintain value position
What we sell - maintain value position Wickes a ro ° Fewer & bigger promotions on products that matter Wickes more expensive: ° Better KVI pricing 5100 Ne EEE EE ELLE EEE Eeeee ° Re-engineer private label portfolio to broaden range & 50 reduce duplication ° Stronger communication of o | . value DIY
Slide 70: How we sell - good opportunity to expand
How we sell - good opportunity to expand Wickes ° New Wickes stores earn >25% LAROCE ° ~60 new store opportunities across the UK ° Store refurbishment trials through 2015, to roll out 2016- 2019 ° Stores to remain 25-30,000 ft2 ° Limited ‘tail’ management Travis Perkins ® 204 Oper ‘Gravity’ modellin
Slide 71: Illustrating value creation from capital deployment
Illustrating value creation from capital deployment New Wickes Branch Annualised year 1 EBITDAR £0.8m Lease adjusted investment £3.1m Annualised year 1 returns ~20% Returns after 5-year maturity 4t ° Capital deployment a key lever of value creation © Provides confidence to continue Travis Perki ns a
Slide 72: How we sell - multi-channel
How we sell - multi-channel Wickes Simple to transact jeff h of one click ° | wow | = @ = Product info and content hub Project shopping Extended range online Better delivery (day of choice) Connecting to store Travis Perki ns GS 2014 Operational Briefing - 27 November 2014 72
Slide 73: Wickes transformation
Wickes transformation Wickes ° New team in place over last six months ° Wickes is structurally advantaged to compete ° Achanging DIY / trade landscape works to our advantage ° Comprehensive transformation plan to address what we sell, how we sell it, how we work and our efficiency ° It is early days
Slide 74: Toolstation
Branch Locator Browse by department Power Tools Power Tool Accessories Screws & Fixings Hend Tools Access & Storage Landscaping Automotive Workwear Control Cleaning & ting Painting & De Adhesives & Sealants, AWinTéRaB Over 150 prizes to HSS Titanium ee £10.10 cao 160+ UK Customer services S58 Bosch
Slide 75: Toolstation history
Toolstation history 11,000+ product lines * >20% online penetration 2015 - 20 Toolstation 2015+ implants’ to utilise excess space 30 * 180 stores across the UK in Wickes and Toolsation + New reaches 152 branches stores pa. In-house developed end-to-end ERP system 2008-2011 - Toolstation opens 92 sta
Slide 76: Toolstation growth
Toolstation growth 250 ; 250 200 mmm Revenue ===Branches ~ 200 © x a 150 - 150 » 2 a 5 4 d 5 g 100 ~ 100 & He 50 ~ 50 0 0 2008 2009 2010 2011 2012 2013 2014E Bae sewary Electrical Plumbing & Heating Travi S Pe rki ns co) 2014 Operational Briefing - 27 November 2014 76
Slide 77: Consumer ambition
Consumer ambition Medium-term Measure Current an ambition 227 Wickes , Network expansion 108 TileGiant sorts ne 175 Toolstation pa. Like-for-like sales Above Above outperformance market market Operating margin 6% Good improvement prospects Capital expenditure £20m ~£40m pa. Add 150- fe} LAROCE 6% 25
Slide 78: Questions
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Slide 79: IT & Supply Chain
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Slide 80: Key messages
Key messages The network is key for the branches, supply chain & central functions Infrastructure improvements Telephony remains integral to the customer experience Enabling mobile customer interaction with our businesses Integrated supply chain solutions More efficient stores, branches and support
Slide 81: IT historically low cost & functional, but inflexible
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Slide 85: Investing in supply chain
Slide 86: Key messages
Slide 87: Service to customers is paramount
Slide 88: Part-way through a network transformation
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Slide 92: Questions
Slide 93: Wrap up - John Carter
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Slide 96: Questions
Slide 97: Appendices
Slide 98: I. Plumbing & Heating branch reconciliation
Slide 99: II. Definitions
Slide 100: II. Definitions (continued)
Slide 101: Contact