Travis Perkins : Interim Results

Interim Results

September 2020

Half Year Results September 2020

Introduction Nick Roberts

H1 2020 - progress despite COVID challenges

Significant pandemic impact on the P&L but outstanding cash performance

Rapidly adapted business models - ensuring safety while providing an essential service to keep the UK's homes warm, dry and safe

Accelerated elements of the strategic plan across digital enablement, customer fulfilment, process simplification and branch network

Significant improvement in digital platforms across Merchant businesses with Wickes and Toolstation leveraging existing capabilities - underpinning market outperformance and supporting future growth

4

Financial Review Alan Williams

Basis of results

Toolstation Europe consolidated from 01 October 2019 - £31m of revenue included in Toolstation total sales (not in LFL) - Expectation for £20m annualised losses unchanged

PF&P wholesale - sold in January 2020

Wickes demerger paused - numbers remain consolidated

Impacts of COVID-19 within adjusted figures

Restructuring costs taken as adjusting items

6

Six months ended 30 June 2020 (£m unless otherwise stated)	HY 2020	HY 2019	Year-on-year change*
Revenue	2,781	3,484	(20.2)%
Like-for-like sales growth	(19.3)%	5.3%	(24.6)ppts
Adjusted EBITA	42	220	(80.9)%
Adjusted earnings per share (pence)	1.4p	56.5p	(97.5)%
Adjusting operating items	(129)	(154)
ROCE	6.4%	10.0%	(3.6)ppts
Covenant net debt	22	414	(392)
Dividends per share	-	15.5p

7

Impressive Toolstation LFL performance in UK and EuropeWickes core DIY sales strong, K&B installation recovering steadilyAcross the Merchants, RMI recovered quicker, large projects and housebuilding lagging

LFL revenue growth	Q1 2020	Q2 2020	H1 2020
Merchanting	(8.7)%	(42.8)%	(25.8)%
Toolstation	9.1%	16.5%	12.9%
Retail	4.5%	(19.8)%	(8.2)%
Plumbing & Heating	(1.9)%	(48.4)%	(22.8)%
Total Group	(3.8)%	(34.8)%	(19.3)%

8

9

Volume environment severely impacted by the pandemicImpact of sales price and mix changes netted out in the halfNetwork change includes PF&P sale and Toolstation Europe acquisitionModest impact in the period from branches closed in June

One additional trading day in all businesses, excluding COVID impact

H1 2019 gross margin

H1 2020gross margin

Annual volume

rebates

Supply chain

costs

Category mixSegmental mix

*Arrows are demonstrative and are not to scale

Overall Group gross margin unchanged on H1 2019 despite COVID related impacts:

• - Positive segmental mix from relative strength of Retail and Toolstation

• - Adverse category mix from greater proportion of heavyside and seasonal DIY sales

• - Higher supply chain costs from warehouse inefficiency and more home delivery

• - Lower expected Annual Volume Rebates from lower purchases

Expect same factors but to a lesser extent in H2 - gross margins to remain stable

Challenging market outlookTough but decisive actions takenSignificant P&L benefits

Significant uncertainty in the

UK economy from COVID and

Brexit

Cautious outlook for building

materials volumes in the short

to medium termRestructuring programme

addresses network capacity

and cost base to serve

anticipated demandTargeting 165 branch closures across Merchanting, P&H and

Tile Giant

Focus on small, subscale branchesAbove-branch cost rationalisation across all businesses and support functions

Targeting overall reduction in number of roles in the Group by 2,500

Expected to deliver £120m of annualised cost savingsMajority of actions completed by end August giving 4 months of benefit in 2020

Associated cash costs of around £85m, of which £35m in 2020

Future costs relate to property - broadly offset by selling closed freeholds sites

Ensuring the right network and cost base for current trading and as a platform for the future

One third of branches open during lockdown to support essential services - phased reopening in April and May

Gradual recovery of construction market - faster recovery in RMI, slower in housebuilding and larger projects

Despite lower overheads, high fixed costs resulted in reduction in operating profit

Branch network rationalised to focus operations from right-sized branches in optimised locations

*Divisional adjusted operating profit figures are presented excluding property profits **2019 branch network figures for comparison are taken at 31 December 2019

Double-digit like-for-like UK sales growth despite the disruption of lockdown

Successful pivot to digital trading with click & collect and direct delivery

ROCE

Toolstation Europe consolidated - strong revenue growth (56% LFL growth)

Branch network (Europe)** Memo:

Operating profit impact by higher cost of trading and impact of TSE losses

*Divisional adjusted operating profit figures are presented excluding property profits **2019 branch network figures for comparison are taken at 31 December 2019

UK Network expansion paused during lockdown - restarted with 19 branches opened in July and August (FY target 60)

Total revenue

Like-for-like growth

Adjusted operating profit*

Adjusted operating margin

Branch network (UK)**

Adjusted UK op profit

Leveraged integrated digital capabilities during lockdown with stores acting as fulfilment centres

Strong recovery led by DIY sales and exposure to RMI markets - LFL sales growth since June

Total revenue Like-for-like growth Adjusted operating profit* Adjusted operating margin ROCE

Gross margins flat - mix impact of K&B closure offset by lower promotional activity

Store network - Wickes** Store network - Tile Giant**

Reduction in operating profit margin as higher operating costs partially offset by rates relief

*Divisional adjusted operating profit figures are presented excluding property profits **2019 branch network figures for comparison are taken at 31 December 2019

Sales dropped to a third of prior year levels during lockdown

Slower recovery than general merchanting

Lower sales includes £100m y-o-y fromdisposal of PF&P wholesale

Total revenue Like-for-like growth Adjusted operating profit/(loss)*

Gross margins stable as sale of PF&P and recovery in small installer customers offset lower rebates

Adjusted operating margin ROCE

Restructuring actions expected to deliver c. £25m of annualised savings

*Divisional adjusted operating profit figures are presented excluding property profits **2019 branch network figures for comparison are taken at 31 December 2019

Branch network**

Strong free cash flow generation of

£305m

Significant working capital inflow:

−

Inventory reduced by £154m through reduced purchases and sharing stock between businesses

− Strong customer collections during lockdown period drove significant trade receivables reduction

−

£100m of VAT deferred to 2021

Capital expenditure - focusing on the priorities

Cash capex in H1 includes Wickes and

payment of some 2019 investments

Significant tightening of capex

investment since March

IT developments focused on smaller

scale, phased improvements - lower

capitalisation, more expensed

Toolstation network expansion back

underway from July, on track to open

60 new branches in 2020

Capex forecast for 2020 of £70-£80m

(£m)	H1 2020	H1 2019
Maintenance	(22)	(22)
IT	(3)	(12)
Growth capex	(22)	(17)
Base capital expenditure	(47)	(51)
Freehold property	(12)	(9)
Gross capital expenditure	(59)	(60)
Disposals	18	29
Net capital expenditure	(41)	(31)

Receipt of £50m on the disposal of

PF&P wholesale in January

Net freehold transactions Acquisitions / disposals Dividends

Wickes demerger paused (£130m)

Cash costs of adjusting items modestly lower year-on-year

Cash payments on adjusting items Other

FY2019 final dividend payment suspended (£82m)

Stable leverage - reduction in net debt offset drop in earnings

Agreement with lenders in May to relax covenants for June and December 2020 assessment

*Leverage covenant for June 2020 was relaxed from 3.0x to 3.5x. It has been waived for December 2020

Free cash flow (£m)

Change in cash or cash equivalents

Outlook and technical guidance

Outlook:

Long term fundamentals remain strong, but significant uncertainty in the UK economyPositive catalysts from Government stimulus and strong domestic RMI / DIY recoveryRestructuring actions completed in August - annualised savings from SeptemberCautious on near-term volume, but business well placed to outperform the market

Technical guidance:

Effective tax rate of 22%

Finance charges expected to be similar to 2019

Base capital expenditure in 2020, including Wickes, in the range of £70m to £80m

Property profits likely to be around £10m

Operational Review & Strategic Update Nick Roberts

Introduction

COVID - immediate response to the pandemic to safely maintain our essential services

Accelerated elements of the strategic plan to strengthen the core of the business

Customer interactions changed during COVID - continue longer term strategic thinking to develop and exploit competitive advantages

Actions pre-lockdown

Focus on security of supply chain - particularly far east sourcing

Mobilising to move support functions to working from home

IT functionality to enable mass home working

Complex functions - e.g. credit control

Essential trading through lockdown

Essential service for UK Construction - keeping Britain warm, dry and maintained

Support of critical infrastructure e.g. Nightingale hospitals

"Service-light" model - contactless with customers

A third of Merchants open,

Wickes and Toolstation digital only

Focus on cash and liquidity

"Winning the Peace"

Early planning for "what comes after lockdown"

Use time and resources to drive improvements - acting at pace

Advance immediate and future customer propositions

Accelerated strategic progress towards Strengthening the Core

Long-lasting advancements, not just focused on short-term

Safety and wellbeing of colleagues, customers and suppliers the first priority throughout

3 4

TP general merchant - accelerating the strategy

Adapting quickly to continue to deliver outstanding customer service

• ● Speeded up range reviews

• ● Locally tailored product ranges

• ● Improved stock accuracy vital for click & collect

• ● Simplified supplier rebates providing clearer product pricing in branch

• ● Customer demand for digital relationship more immediate

• ● Developed click & collect service model

• ● Helping customers be more planned and efficient

• ● Use technology to enable colleagues

• ● Partnerships with suppliers absolutely key

• ● Managed stock across the network to maintain product availability

• ● Suppliers paid on time, in full

• ● Early payment support for SME suppliers

• ● Forecast for lower volume demand - reset capacity

• ● Accelerate subscale branch closures

• ● 82 TP branches closed in June

• ● Acceleration of expected network changes

Progress to enhance Merchanting digital capabilities

Digital capability in Merchanting much more than just the transaction

Transaction - strong rise in web sales

Shift in customer interaction with "in branch" not an option - higher short-term priority

Click & Collect proposition requires strong online platform

Better visibility of pricing, availability, delivery timing

Convenient, digitised relationship

Customer relationship much broader than the transactionSimplified account management:

• ● Invoice and proof of delivery

• ● Credit account settlement

Customer and colleague specific applications to improve productivity

More to do - challenges around efficiency of customer fulfilment

Toolhire partnership with

TP general merchant to offer bespoke customer proposition

New customer portal for account managementReorganisation of tender process

Deployed pricing templates to simplify and clarify customer pricing

Significant developments in BIM capabilities

Leveraged the digital developments across

Merchanting

Click & Collect proposition through a new web portal giving improved customer convenience

New strategic partnership with TP general merchantGreater sharing of systems and processes

More convenient for customers with single account view

P&H - providing essential support for installers

Consistent support for essential maintenance throughout lockdown

Improved digital capabilities: - Upgraded web platform and click & collect service - Success of pure online businesses e.g. Plumbnation

Good RMI recovery inc. Bathroom Showroom volumes

Closed 18 branches to optimise branch network and streamlined above-branch activities

Disposal of low-margin PF&P wholesale simplifies the businessContinue operational improvements to improve returns

UK: significant business developments

Pause to network expansion plans has not limited business improvementsBranch openings back underway: 19 since July, on track for 60 in 2020

Significant uplift in digital transactionsChallenges for customer fulfilment

Click & collect orders from 10% to > 90%

during the crisis

Unprecedented pressure on IT architecture

Rebuilt the web platform over Easter weekend

giving greater speed and more capacity

Replatformed the main IT architecture in

weeks

Dark stores acting as fulfilment centres Timed click & collect slots - "Drive Through" branch set up very successful

High volume of direct to home delivery created distribution centre constraints Repurposed Redditch DC for home delivery

Achieved impressive LFL growth with a stronger platform for the future

Europe: proposition gaining traction

Earlier impact of COVID in Europe - challenges of differing Government approachesCombination of strong multichannel digital capability, reliable stock levels and low pricing proving attractive to trade and DIY customers

Acquired a significant number of trade and retail customers - demonstrating "stickiness"

Network expansion delayed but back underway with 8 opened in H1

Targeting around 20 for 2020 overall

Total sales	Like-for-like
growth	sales growth
Netherlands & Belgium	79%	56%
France	74%	61%

Wickes - demonstrating benefits of digital integration

Agility stems from digitally-led business model - pivoted to 100% digital tradingStores acting as fulfilment centres for online trading channels

Unprecedented online demand

Re-invented K&B showroom journey

60,000+ orders per day for C&C or home delivery

Six months worth of C&C picks every six days+400% growth in online customers+100% increase in conversion rateOver 1 million new customers

Demand for improvements evident before reopening of stores

Distanced design appointments in-store Digitally enabled "home visits"

Rigorous installer procedures to operate in homes safely

Core DIY sales continuing strongly - local trade coming back to work

Healthy lead generation in K&B showroom since reopening

Important lessons learned

Decisions led by strong culture and values - maintaining safety, but committed to customers and fulfilling an essential service

An enormous amount can be achieved when we focus and act at paceFirst attempts aren't perfect

Model of trial, analyse and refine, and importantly - share

Able to adapt to new ways of working quickly

Much more technologically capable than we thought - including use of dataCollaboration between teams and businesses generates huge value

Inflection point in customer behaviour as a consequence of COVID

Strengthen the Core

Creating a modern merchantLeading partner for the construction industry

Get the fundamentals right

Regenerate the Travis Perkins general merchant

Accelerate growth of

Toolstation - UK and Europe

Organisational platform fit for the future

Accelerated the plan with lots still to do

MultichannelDigitally enabled

Collaboration between businesses

Customer intimate - "One customer view"

Leading, advantaged customer propositions

"How to partner with the breadth of our customer base to enable them to do more, more easily?

How do we enable them to grow their businesses in order to grow our business?"

Future strategic aims will be built on the foundations of a strong core

Maintained an essential service throughout - helping keep the

UK dry, warm and safe

Actions prioritised safety of colleagues, customers and suppliersOutstanding focus on cash flow and protecting liquidityEnforced, structural changes in customer behaviours - businesses rose to the challenge

Rapidly adapted business models to continue to deliver serviceAccelerated elements of the plan to Strengthen the Core

Early restructuring of the business to right-size the cost base and build resilience for the future

Although significant economic uncertainty remains, the Group well placed to use its advantages to outperform its markets

Questions

Appendices

Plumbing &Total revenue MerchantingToolstationRetail Heating	Group
Volume Price and mix (25.5)% (0.3)% 14.4% (1.4)% (7.0)% (1.1)% (26.5)% 3.7%	(19.3)% -
Like-for-like revenue growth (25.8)% 12.9% (8.2)% (22.8)% Network expansion and acquisitions / disposals (0.7)% 23.5% (0.8)% (11.2)% Trading days 0.6% 0.6% 0.5% 0.6%	(19.3)% (1.5)% 0.6%
Total revenue growth (25.9)% 37.0% (8.5)% (33.4)%	(20.2)%

Merchanting

GeographyCategoryPaymentDelivery

Timber Forest 13% 9%

Northern 20.9%

Cash 23%

Collected 42%Midlands

27.5%

Heavyside 49%South West

21.2%

Credit 77%

Delivered 58%

Lightside 15%

South East 29.9%P&H Other 9% 5%

Toolstation

Geography

Northern 26.0%

Midlands 25.0%

South West 15.0%South East 34.0%

Category

Lightside 100%

Payment

Cash 100%

Delivery

Collected 79%Delivered 21%

Retail

Geography

Northern 20.0%Midlands 27.0%South West 16.0%South East 37.0%

Geography

Northern 32%Midlands 20%

South West 18%South East 27%

Category

Timber 16%Forest 10%

Heavyside 15%

Lightside 26%

P&H 32%

P&H

P&H

CategoryPaymentDelivery

Collected 63%Cash 90%

Delivered 37%

Credit 10%

PaymentDelivery

100.0%
Cash	Credit
20%	80%
Collected
41%

Delivered 59%

GeographyCategory

Timber

9%

Northern

23.0%

Forest

6%

Heavyside

23%

Midlands	South West	South East
25.0%	18.0%	33.0%
Lightside	P&H
25%	34%

Group

Cash

Credit

Payment

50%

50%

Collected

Delivered

Delivery

53%

47%

Construction output

Jun YTD

Trade confidenceExpected workload

(20)%

Q2 20 + 17pt

New construction orders

Q1 20 (32) pt

Q2 20 (45)%

Travis Perkins Benchmarx Keyline CCF

BSS & TF Solutions Merchanting Toolstation UK Toolstation Europe Toolstation

PTS

City Plumbing Other

P&H Wickes Tile Giant Retail Group

31-Dec-19	31-Jun-20
642 181 56 42 64	2 2 (84) (35) (10) (7) (5) - - - - -	560 148 46 35 59
985	4 (141) -	848
400 66	10 (1) 8 - -	409 74
466	18 (1) -	483
64 296 15	(8) (8) (5) - - -	56 288 10
375	-(21) -	354
235 94	(1) - -	235 93
329	- (1) -	328
2155	22 (164) -	2013

2013 2014 2015 2016 2017 2018 2019 2020 HY

Opening New Closures Closing

1,896 1,939 1,975 2,028 2,053 2,076 2,087 2,154

58 101 124 82 86 75 117 22

(15) (65) (71) (57) (63) (64) (50) (163)

1,939 1,975 2,028 2,053 2,076 2,087 2,154

2,013

Like-for-like sales by quarter:

Q1 2018 Q2 2018 Q3 2018 Q4 2018	Q1 2019 Q2 2019 Q3 2019 Q4 2019	Q1 2020 Q2 2020
Merchanting Toolstation Retail P&H 10.6% (7.9)% 19.7% 10.4% (6.0)% 8.4% (7.2)%	(0.5)% 5.5% 4.3% 20.1% 14.8% 5.2% 13.3% 3.5% 12.0%	10.6% 19.1% 10.0% (4.0)% 2.7% 15.7% 9.4% 1.6% (1.4)% 15.4% 15.3% 9.7% 4.6% (3.9)% - 0.9%	(8.7)% (42.9)% 9.1% 16.5% 4.5% (19.8)% (1.9)% (48.4)%
Group 3.0% 5.9% 4.1% 6.9%	7.3% 3.4% 3.4% 1.2%	(3.8)% (34.8)%

Like-for-like sales by half:

H1 2018 H2 2018	FY 2018	H1 2019 H2 2019	FY 2019	H1 2020
Merchanting Toolstation Retail P&H 2.4% 4.7% 10.7% 12.0% (7.4)% (1.8)% 19.8% 12.9%	3.6% 11.4% (4.3)% 16.1%	6.4% 0.2% 17.3% 15.4% 9.7% 7.2% (3.9)% 0.4%	3.3% 16.3% 8.6% (1.7)%	(25.8)% 12.9% (8.2)% (22.8)%
Group 4.2% 5.5%	4.9%	5.3% 2.3%	3.8%	(19.3)%

Metric

Definition

Site visitorsSite reservationsMortgage approvalsHousing transactionsHousing pricesConsumer confidenceClimate for purchasesEquity withdrawalRetail sales growthArchitect work loadConstruction outputTrade confidenceExpected workloadNew construction ordersHouse Builders Federation Survey / monthly / July 2020 / Balance score compared to a year agoHouse Builders Federation Survey / monthly / July 2020 / Balance score compared to a year agoBank of England / monthly / July 20 / number of approvals % change year on yearHM Revenue & Customs / monthly / July 2020 / number of houses sold above £40k % change year on yearNationwide / monthly / August 2020 / house price inflation % change year on yearGFK / monthly / August 2020 / index scoreGFK / monthly / August 2020 / index scoreBank of England / quarterly / Q1 2020 / Change in Equity withdrawal as % of net earnings compared to previous quarterBritish Retail Consortium / monthly / July 2020 / LFL % change year on yearMirza and Nacey Survey / quarterly / Q2 2020 / Index - balance scoreConstruction output YTD ONS / monthly / June 2020 / % change year on yearTravis Perkins survey materials spend / quarterly movement / Q2 2020 view of Q3 2020

Federation of Master Builders / quarterly movement / Q1 2020 view of Q2 2020 / Balance score (publish later than TP survey, smaller sample of ~400)

Office for National Statistics / quarterly SA / Q2 2020 / % change year on year

Metric Definition
Operating profit	Earnings before results of associates, interest, tax and amortisation of acquisition-related intangible assets
Earning per share ("EPS")	Ratio of net profit after taxation adjusted for minority interests to weighted number of ordinary shares outstanding
Adjusted operating profit / Adjusted EPS	Operating profit / EPS before adjusting items and amortisation of acquisition-related intangible assets
ROCE	Ratio of adjusted operating profit to debt plus equity
Covenant net debt	On-balance sheet debt excluding lease liabilities and pension SPV liability
Net debt	On-balance sheet debt including lease liabilities
Gearing	Ratio of debt to equity plus debt
Fixed charge cover	Ratio of adjusted operating profit before depreciation to interest plus lease right-of-use asset depreciation
Net Debt : EBITDA	Ratio of Net debt to earnings before adjusting items, interest, tax, depreciation and amortisation
Free cash flow ("FCF")	Net cash flow before dividends, capital expenditure, freehold acquisitions and disposals, pension deficit contributions & financing cash flows
Total Shareholder Return ("TSR")	Ratio of opening market price per share to closing market price per share less opening market price per share plus dividends per share during the period
WALE	Weighted average expiry of property leases

Contact

Graeme Barnes | [phone] Richter | [phone]