Travis Perkins : Financial Document

Leading partner to

the construction industry

Annual Report and Accounts

2023

What the Group does

Our purpose

Here to help build better communities and enrich lives.

The Group enables customers to build, repair and maintain the buildings and infrastructure that touch all of us, every day.

Contents

Strategic report

Financial statements

2 Highlights

1. Overview

1. At a glance

1. Chair's statement

1. Market overview

1. Investment case

1. Business model

1. Chief Executive's statement

1. Strategy

1. Key performance indicators (KPIs)

1. Sustainability report

1. Climate-relatedfinancial disclosure

1. Business performance and priorities

1. Financial review

1. Statement of principal risks and uncertainties

1. Non-financialand sustainability information statement

Governance

88 Board of Directors

1. Corporate governance report

1. Section 172 statement

1. Nominations Committee report

1. Audit Committee report

1. Directors' Remuneration report

1. Directors' report

1. Directors' statement of responsibilities

1. Independent Auditor's report

1. Consolidated income statement

1. Consolidated statement of comprehensive income
2. Consolidated balance sheet
3. Consolidated statement of changes in equity
4. Consolidated cash flow statement
5. Notes to the consolidated financial statements

1. Company balance sheet
2. Company statement of changes in equity
3. Notes to the Company's financial statements

1. Five-yearsummary

Other information

1. ESG data report (including SASB data)

1. Other shareholder information

For more and the latest information please visit the Group's website at: www.travisperkinsplc.co.uk

Travis Perkins plc  Annual Report and Accounts 2023

Purpose

Travis Perkins plc is a purpose- driven organisation with its values, commitment to 'Doing the Right Thing' and goal of helping to build better communities and enrich lives, underpinning everything the Group does.

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Markets

The Group's advantaged businesses hold market-leading positions in an attractive £73bn market for construction materials which has long-term structural growth drivers.

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Strategy

Toolstation UK's platform for growth, TF Solutions' category expansion and Managed Services' unique offering to the repairs and maintenance sector illustrate the Group's strategy.

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Strategic report

Governance

Financial statements

Other information

Sustainability

As sustainability continues to grow in importance for stakeholders, the Group is uniquely able to convene the supply chain to collaborate and co-create solutions, influencing and supporting the sustainability changes the construction industry needs.

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Travis Perkins plc  Annual Report and Accounts 2023

1

Highlights

2023

A challenging year in weak market conditions, with the Group driving actions to support profit recovery and enhance cash generation.

Revenue

£4,862m

2022: £4,995m

Dividend per share

18.0p

2022: 39.0p

Net debt/adjusted EBITDA

2.6x

2022: 1.8x

Graduated apprentices

414

2022: 370

Adjusted operating profit

£180m

2022: £295m

Profit after tax

£38m

2022: £192m

Return on capital employed

6.3%

2022: 10.8%

Carbon emissions (kt of CO₂e)

8,004

2022: 8,294

2 Travis Perkins plc  Annual Report and Accounts 2023

Protecting market position in challenging conditions

• Progressive downturn in new build housing and private domestic RMI markets leading to Group revenue 2.7% lower than prior year
• Combination of lower volumes, overhead cost inflation and rapid commodity price deflation in H2 resulted in full year adjusted operating profit of £180m (2022: £295m)
• Invested to protect and build market positions with market share gains in both Toolstation and Travis Perkins General Merchant

Transforming the operating model to build a stronger business

• Step change reduction in non-branch cost base delivered with £35m annualised savings
• Working on a plan for a potential exit of Toolstation France; strategic review of options for Toolstation Benelux
• Optimising Benchmarx branch network with focus on integrated offer within destination
• Continued rationalisation of legacy Toolstation UK supply chain, following successful opening of the new Pineham distribution centre
• Delivering profit enhancements through simplification of group structures, lowering supply chain costs and harnessing benefits from new technology
• Operating profit of £110m (2022: £285m) reflects trading performance and adjusting items of £60m recognised in 2023, of which around £16m is cash, related to impairments in Toolstation France and Benchmarx together with restructuring actions

Enhancing cash generation to support future

capital allocation

• Reduced capital expenditure requirements in near term; £80m guidance for 2024
• Review of working capital opportunities underway
• Refinancing completed, supporting robust balance sheet; no funding maturities before 2026
• In line with policy, 2023 proposed full year dividend of 18.0 pence per share (2022: 39.0 pence per share)

Strategic report

Governance

Financial statements

Other information

Travis Perkins plc  Annual Report and Accounts 2023

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Overview

Purpose

To help build better communities and enrich lives

Ambition

To be the leading partner to the construction industry

Strategy

The Group's strategy is to grow the share of its market-leading businesses by offering customers attractive propositions which mean they spend more with the Group. The Group seeks to elevate customer relationships through the addition of value-added services, solving customer pain points and moving up the value chain. In addition, the Group is deepening its customer relationships by winning a greater share of customer spend through the addition of digital channels, new ranges and relevant offers.

ELEVATING

RELATIONSHIPS

Professional trades		Larger contractors
and general builders		and developers
Smaller customers who value		Larger and more complex
local relationships and who		customers who serve local and
serve domestic and light		national markets, often
commercial markets for		working in conjunction with
mostly RMI work.		other contractors, suppliers
		and specifiiers to deliver new
		build and RMI solutions across
		residential, commercial and
		infrastructure.

DEEPENING

RELATIONSHIPS

Sustainability priority

Decarbonising the industry

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Building for better
Changing the game	Doing the right thing
Modernising	- Safety and wellbeing
construction
- Colleague voice
Sourcing	- Diversity, equity
responsibly	and inclusion
Operating	- Reward
- Charity and community
sustainably	- Legal compliance
Developing the	- Modern slavery and
next generation	human rights

Values

The values reflect what matters and how the Group does things.

We care

We give our best to be the best

We're better

together

Delivering shareholder value

Strategic report

Governance

Financial statements

Other information

Travis Perkins plc  Annual Report and Accounts 2023

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At a glance

Travis Perkins is the largest distributor of building materials in the UK

A trade-focused Group, serving generalist and specialist trades with products and services that are designed to help customers grow their businesses in new and established markets.

Large and varied customer base	Broad geographical spread in the UK
200k	£4.9bn
Trade credit customers	Revenue
Engaged colleagues in the UK and Europe	Evolving branch network
19k	1,509
Colleagues	Branches

The Group's goal is to deliver exceptional customer service from advantaged businesses operating from well-positioned networks in chosen geographies. The Group offers a range of high-quality products and gives customers the choice of a range of channels, fulfilment options and ways to pay.

Geographic split			Product mix			Channel
						Collect		38%
						Deliver		62%
						Product mix
						Cash	28%
South-East	32%	Heavyside	48%
Credit				72%
Midlands	24%		Lightside	21%
North and Scotland	22%		Plumbing & Heating	19%
Wales and South-West	19%		Timber	12%
Europe	3%

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Merchanting

Toolstation

Strategic report

Governance

Financial statements

The market-leading general merchant, offering a destination for heavyside products, complemented by lightside convenience. Serving general trades and specialist contractors with 60% delivered products from 622 national locations. Contains a comprehensive tool

hire offer plus innovative Managed Services solutions.

Distributes insulation and interior building products from 36 branches to contractors throughout Great Britain. CCF supports the construction and renovation of both domestic and commercial buildings with service and specialist knowledge.

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Market-leading supplier of commercial and industrial heating and cooling solutions, supplying specialist contractors with a wide variety of products from 69 branches and two distribution centres. BSS offers customers a tailored tool hire service and contains TF Solutions, a specialist provider of air-conditioning products and heat pumps.

A civils specialist, Keyline supports housebuilders, groundworkers and infrastructure contractors to build and redevelop facilities which are vital to the nation. Delivering heavy products from 42 branches in a safe and accurate manner, Keyline works as a partner to its specialist customers and is developing new areas of expertise in roads and highways.

Offers customers an innovative lightside proposition. With a wide range of products available in- branch and for next-day delivery, long opening hours, a strong digital offering and a committed customer service ethos, Toolstation is changing the purchasing experience of trade and DIY customers. Toolstation operates from 570 branches across Great Britain and is growing quickly in the Netherlands, Belgium and France.

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Other information

Travis Perkins plc  Annual Report and Accounts 2023

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Chair's statement

Distributions to shareholders

In 2021 the Group laid out clear guidance on shareholder returns and I am pleased to reiterate those principles here. The Group will deliver returns to shareholders by:

• Achieving the best earnings number available, given market conditions and in accordance with our values and long-term views.
• Paying out 30-40% of those earnings each year as an ordinary dividend.
• Ensuring that we fund this through strong cash conversion, disciplined capital allocation and remaining within our published leverage targets of 1.5-2 times net debt/EBITDA.

2023 was a challenging year for the Group as a combination of macroeconomic uncertainty, progressively weakening end market demand, sharp deflation on commodity products and overhead inflation made business planning difficult, weighing heavily on the Group's earnings performance during the year. Whilst some good progress has been made against our strategic priorities, management's primary focus is now to drive efficiencies through the transformation of the Group's operating model and prioritise capital allocation to support the recovery of profitability and reduction of leverage in the medium term.

Taking into account all of these factors, I am confident that we are taking the right decisions to drive profit recovery, enhance cash generation and strengthen the business for the long term, and for 2023 the Board recommended a final dividend of 5.5 pence per share (2022: 26.5 pence per share) to give a full year dividend to 18.0 pence per share (2022: 39.0 pence per share), in line with the Group's previously communicated policy.

This reduction reflects the reduction in earnings and the Board's clear commitment to ensuring that the Group swiftly returns leverage to the target range.

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Dynamics impacting the Group's end markets resulted in 2023 being a difficult year with earnings down notably, but I am confident that we are taking the right decisions to drive profit recovery, enhance cash generation and strengthen the business for the long term.

Jasmine Whitbread

Chair

I ended my statement in the 2022 review with a thought on how it would be very hard to predict the shape of the UK economy in 2023 and what level of recovery, if any, we would see in the construction sector. During the last year we have seen a number of dynamics impacting the Group's end markets that have resulted in 2023 being a difficult period with earnings down notably which is reflected in the Group's share price.

At a macroeconomic level, persistently higher consumer inflation, leading to elevated interest rates has resulted in a pronounced slowdown in the new housebuilding market. In addition, deflationary pressures on commodity products and a sustained slowdown in the domestic RMI market have led to declining revenues throughout the year.

Throughout 2023 the Group's businesses have adapted to address near term trading conditions while continuing to build a stronger business for the future and ensuring that we balance the needs of our investors, customers, suppliers and colleagues. Stronger and more urgent focus on using customer data to help retain and win back customers helped protect and grow our market share, while the modernisation of branches and processes in the Travis Perkins General Merchant contributed to efficiencies.

In September, the Group held a Toolstation UK Capital Markets Update. The update set out the pathway for the Toolstation UK business to deliver £1bn of revenue at a high single digit operating margin by

2027. We shared the Group's confidence in the underlying economic model and the platform we have created for future profitable growth. Toolstation UK is integral to the Group as a highly complementary offer for UK tradespeople with an excellent opportunity to continue to grow share in a large and fragmented market.

People and culture

Our colleagues adapted to changing market conditions, embracing new technology and processes to deliver better customer service. Recognising the importance of a skilled workforce in delivering great customer service and expertise, the Group updated its knowledge, learning, and development offering via a new learning management system called Thrive, complementing its industry-leading apprenticeship programme.

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