travis perkins lodge way house harlestone road northampton nn5 7ug tel 01604 752 424
tra vis perkins plc annual repor t  accounts 2005
tra vis perkins plc
2005
annual repor t  accounts
a leader in builders’ merchanting and home improvement retailing our group mission
“continue to deliver better returns by   
putting in place and growing the best businesses with outstanding
people providing comprehensive building material solutions
to everyone creating maintaining repairing or improving
the built environment
   helping to build britain”
our group vision
“to ensure that anyone in britain who wants to access any kind
of building materials through any form of supply channel will
have a travis perkins’ group operation as their first or first
alternative choice”
our group values
“at travis perkins we
■ know our customers – we understand their needs beat their expectations treat
them with respect and know our major customers personally
■ talk and listen – we say what we mean clearly and honestly we listen carefully
we respond objectively we explain our decisions
■ are with you not against you – we seek mutual benefits with all stakeholders
we think about the impact of our actions we search for similarities not differences
■ know how to do our jobs – not just today but for the next job we equip
ourselves with the skills needed to perform and be confident we can perform
■ like to deliver – we enjoy being the best we know exactly what each of us is
expected to achieve we focus on getting results simply
■ work together – we actively work with each other when something goes wrong
the first thing we will do is fix the problem not look for someone to blame
■ always try to get better – we constructively challenge how we work we look for
fresh ideas that are different we only have rules where they are necessary because
we use our common sense
■ are proud to be here – this is a great company everyone working with us is
welcome we make work enjoyable for everyone”
design · rwh design consultants photography · calvin hewitt print · folium tra vis perkins plc
2005
annual repor t  accounts
1 financial highlights 3
chairman’s statement 4
chief executive’s review 6
chief operating officer’s report 14
finance director’s report 20
corporate responsibility statement 27
directors and professional advisers 28
corporate governance 30
audit committee report 34
remuneration report 36
nominations committee report 45
directors’ report 46
statement of directors’ responsibilities 49
independent auditors’ report 50
income statements 52
statements of recognised income and expense 52
balance sheets 53
cash flow statements 55
notes to the financial statements 56
five year record 93
notice of annual general meeting 95
notes to notice of annual general meeting 97
other shareholder information 99
tra vis perkins plc
2
contents turnover
£m
01 02 03 04 05
2700
2400
2100
1800
1500
1200
900
600
300
0
profit before taxation
£m
01 02 03 04 05
200
160
180
140
120
100
80
60
40
20
0
basic earnings per share
pence
01 02 03 04 05
140
120
100
80
60
40
20
0
£m 2005 2004
turnover 26408 18286
operating profit 2680 2177
profit before taxation 2067 2065
profit after taxation 1408 1421
free cash flow 2261 1507
basic earnings per ordinary share 1168p 1244p
total dividend per ordinary share 340p 305p
turnover up 444
operating profit up 231
profit before taxation up 01
free cash flow note 35 up 500
basic earnings per share down 61
total dividend per share up 115
tra vis perkins plc
3
financial highlights
for the year ended 31 december 2005 results compared to the previous long run of many years which saw steady annual market growth conditions in 2005
were more challenging in response our management teams have focused on maximising profits from our existing branch network
through cost reduction and productivity improvement as well as continuing to grow our business through brown field developments
and selected acquisitions including wickes
the wickes acquisition is profit enhancing in 2005 reflecting excellent progress in management integration and above
target improvements in procurement and in overhead costs
considerable progress has been made operationally in 2005 our business is now some 50 per cent larger we have added
a record number of new branches and stores productivity gains have been made in merchanting the wickes acquisition our largest
ever has been integrated successfully and debt on a proforma basis has been reduced by over £70 million following completion of
the acquisition of wickes see note 33 we continue to enjoy sector leading operating margins in merchanting and have improved
wickes relative performance so that it now enjoys the highest operating margin amongst its peers
dividend the group continues to be highly cash generative as a result of this and our confidence in the future prospects
of the group the board is recommending a final dividend of 230 pence per share taken together with the interim dividend of
110 pence this represents a total dividend of 340 pence an increase of 115 per cent on the previous year
board of directors andrew simon became a nonexecutive director of the company in february 2006 following
a 23 year career successfully developing a building materials manufacturer as its chief executive and then chairman he has
developed considerable experience as a nonexecutive director from a diverse portfolio of companies
corporate governance during the year the board has continued to review actively all of the major areas of risk to
the group further details of the governance controls can be found under the corporate governance section of the annual report
and accounts
outlook we have made a satisfactory start to 2006 with merchanting volumes ahead of expectations although there
are signs that our markets are likely to recover we expect the first half year to remain challenging with any recovery coming in the
second half year
tra vis perkins plc
4
chairman’s statement for the year ended 31 december 2005 we have recently seen gradually improving trends in lead indicators consumer confidence
is rising although continued inflation in nondiscretionary living costs will mean any recovery in
spending by consumers particularly for home improvement projects will be gradual the overall
housing market shows some improving trends although these are not yet well established
there has been a recent slow down in the expansion of capacity in both diy and trade
markets some competitor diy stores have closed and the appetite of merchants to expand their
networks has waned whilst expansion in 2005 added about 3 to 4 per cent of new capacity to
each market we expect this to come down to 1 to 2 per cent in the next two years this should
have a beneficial effect on the performance of likeforlike stores and branches the work we have
done to reduce costs and capture synergy benefits and buying gains leaves us well positioned to
benefit from any improvement in volumes in both merchanting and retailing our cash flow remains
strong and we expect to continue to expand our networks and further reduce our net debt
we are approaching the important easter trading period for both our divisions and it is
too early to change expectations for the year as a whole looking ahead we expect that improving
market conditions will mean that our profit performance will be stronger in the second half of 2006
than the corresponding period in 2005
in 2005 we strengthened our business both strategically and operationally and look
forward with confidence to 2006 and beyond
t e p stevenson chairman
7 march 2006
tra vis perkins plc
5 introduction although 2005 has been more challenging than recent years our businesses have performed well in
relative terms against sector peers and significant progress has been made in the strategic development of the group we faced two
key challenges in 2005 integrating the wickes acquisition which enabled the group to enter a substantial new market for building
materials and coping with the first decline in trade market volumes experienced since 1990
the integration programme for wickes has gone well with all key integration milestones and combined targets for synergy
and buying gains exceeded
previously with strong and rising demand for building materials the group had been able to increase trading and operating
margins whilst growing its likeforlike turnover below market rates early in 2005 we decided to adapt our trading stance to a market
with weaker demand
performance in 2005 we focussed our efforts on tight management of cash and costs achievement of synergy and
buying gains and more active management of profitable sales at each of our merchanting and retailing branches
in merchanting we selectively made a margin investment in some branches and brought our likeforlike sales growth up
to market levels by the end of the third quarter this market relative performance has been sustained our gross margin is stable and
we are making a net positive profit contribution from this investment despite lower likeforlike sales volumes action on costs has
meant that productivity increased over the level achieved in 2004
at wickes through sharp cost reductions and active management of gross margins we have improved operating margin
to become the highest in the sector price competition increased in the fourth quarter in the diy market and our market share gains
made in the first nine months were reversed we have however held on to our gains in gross margin and yet have maintained our
pricing advantage against our diy competitors this performance reflects the resilience of wickes’ low assortment model and the
loyalty it engenders amongst its core customers
the acquisition of wickes and our continued successful programme of expansion in our merchanting network has meant
our revenue base is now about 50 per cent larger than in 2004 this expansionary growth a feature of the group’s progress over
many years adds further scale benefits through improved buying terms and operational gearing of overheads
this increased scale meant we set an ambitious target comprising synergies and stretched buying gains for lowering our
costs of goods sold and overhead costs we exceeded our overall target despite lower than anticipated purchase volumes from
weaker likeforlike sales trends
our focus on cash generation meant we were able to continue to fund our expansion programme and reduce the proforma
debt level in the year by over £70 million see note 33
tra vis perkins plc
6
chief executive’s review for the year ended 31 december 2005 overall weaker market conditions meant that likeforlike sales and profit performance were below our expectations
management actions helped offset much of the shortfall in profit contribution and the group’s profits before tax ended up just ahead
of the prior year
markets the long term market trends for both trade and retail continue to be strong the uk needs more new dwellings
than it is building much of the existing housing stock needs upgrading and public sector infrastructure also requires significant
investment
these trends give us confidence that we can continue to expand our networks in the uk to meet rising demand however
conversion of these long term trends into current spending depends on a number of cyclical factors particularly conditions in the
housing market and general consumer confidence
both consumer confidence and consumer spending were weak throughout 2005 reflecting pressure on consumers’
disposable incomes as nondiscretionary spending increased and lower mortgage equity withdrawal as house price inflation
weakened in addition the housing market experienced lower transaction levels and weaker inflation than in 2004
these trends initially adversely affected retail sales in 2005 and then trade sales from spring onwards particularly on
improvement projects turnover related to repair and maintenance activities remained stable overall we experienced stronger
performance in those divisions with a higher penetration of
commercial industrial and government work and the weakest in
those most closely allied to the consumer
market presence with the acquisition of wickes
travis perkins is serving two segments of a market worth around
£28 billion builders merchants £12 billion and diy £16 billion
our estimated market share of the trade market is 16 per cent
and of diy is 5 per cent our overall market share is around
10 per cent
the travis perkins’ group has a number one position in
the supply of heavy building materials and timber and forest
products and a strong number two position in both domestic
plumbing and heating and in lightside products
the core customer of the trade business is the
jobbing builder and contractor representing an estimated
36 per cent of group turnover between trade and diy other
diy customers represent 21 per cent and national housebuilders
10 per cent
in terms of geographic presence both divisions are
strongest in london and the south east and have pursued an
expansion strategy increasing share in all other regions of great
britain in recent years
overall the group has a good spread of business by
product customer type and geographic region
tra vis perkins plc
market share share of the diy  builders merchants market based
on company estimates  total market size of £287bn
bq 15
travis perkins 10
wolseley 8
st gobain 7
gus 6
grafton 4
focus 3
others 47
tpwickes  lightside
relative sales
1  23456789 10
tpwickes  plumbing  heating
relative sales
05  10 15 20 25 30
tpwickes  heavyside
relative sales
050  200 100 150
tpwickes  timber  forest products
relative sales
050 100  200 150
7
travis perkins competitor 1 competitor 2 competitor 3 competitor 4
market position all our businesses enjoy distinct and strong competitive positioning in their respective markets our trade businesses offer
superior service levels product quality and availability with flexibility in commercial terms to match customers’ requirements our retail
business wickes operates a low assortment model where its concentrated stock range drives low operating costs and strong gross
margins from a high penetration of own label product this enables us to offer the best value for money to diy consumers
strategy the group’s mission and vision are set out at the front of this annual report we aim to develop and operate
businesses dedicated to meeting the specific needs of distinct customer groups seeking to source all types of building materials in
this country our strategy to achieve this aim is designed to generate superior shareholder returns through the execution of three key
programmes
1 continue to drive scale benefits
acquisition growth there is significant scope to add “bolton” acquisitions in the merchant industry where around one
third of the market is owned by around 3200 independent merchants
the group has maintained a comprehensive database of operators both in the general builders’ merchant market and in
other specialist merchanting sectors that also distribute products for the built environment acquisitions have provided an excellent
platform for growth for the group over the past decade and we have a good pipeline of businesses under negotiation we maintained
our disciplined stance to acquisition prices based on stringent return on capital criteria
brown field expansion in catchments where no attractive acquisition targets are available we have been successful in
recent years in acquiring brown field sites and opening new stores we continue to seek suitable properties to fill gaps in our national
coverage of our merchant and retail brands and with a current pipeline potential of around 100 branches we are confident of
continuing growth through this strategy in the future
adaptable trading in merchanting our approach is to seek to maximise profits by adapting our trading stance in terms
of range and price to the conditions we experience in each of our catchments this approach is operated within an environment of
financial controls and incentives that ensures standards are maintained and return on capital employed is maximised
we continually monitor the success of the trading stance adopted at each merchant branch and seek to refine our approach further
to improve performance
refresh our service offer and gain market share we aim to stretch our lead on service criteria in merchanting where
external survey data has shown our relative positioning to be above average
there is always room to improve and we have an established set of performance indicators in place at all outlets of both
the merchant and retail operations
tra vis perkins plc
8
jobbing builders
and contractors
25
house builders
10
ph installers and
contractors
6
ground workers and
civil engineering
5
dry liners
4
maintenance contractors
3
other diy
10
serious diy
11
jobbing builder
11
other trade
12
landscape
gardeners
1
serious diy
2
customer split by spend
retail
merchanting
geographic sales
 of total 2004 annual sales
 of total 2005 annual sales
travis perkins
313
301
275
205
124 396
168
170
247
254
272
275
wickes review our category presence in each outlet we intend to extend the application of
best practice category management techniques across all brands improved merchandising
techniques and use of space will enable us to deepen and extend some of the ranges available in
wickes whilst maintaining a low cost low assortment approach
develop or acquire specialist channels in selected categories we currently serve
markets worth £28 billion in addition there are building material markets totalling around £8 billion
where the group has a limited presence we are examining the scope for entering one or more of
these markets on a selective basis in the latter part of 2006
2 seek further gross margin expansion
we have further scope to improve our synergies and buying gains the 2006 synergy
programme has already made good progress in the area of timber milling our major projects in
2006 include range harmonisation in particular kitchens and bathrooms in both trade and retail
we have now established a global sourcing capability we have refreshed our
quality assurance capability with a permanent presence in china and expanded our central
warehousing capacity
3 drive further productivity and returns on capital
with a network of almost one thousand outlets we have many opportunities to continue
to reduce operating costs by reviewing our targets and performance using benchmarking
techniques labour productivity has improved during 2005 in part driven by these analyses we are
confident that applying these techniques will facilitate cost reduction and productivity in labour
distribution sales marketing and information management
overall productivity in merchanting has increased by 21 per cent likeforlike
headcount in merchanting and retail are 46 per cent and 106 per cent lower respectively in 2005
compared to 2004
tra vis perkins plc
9
200
150
100
50
0
2001 2002 2003 2004 2005
£’000
£192k
merchanting productivity per employee
£160k
£171k
£182k
£196k the business continues to be focused on return on capital with variable pay for all management teams from branch to plc
board having a significant return on capital element this culture is important in driving the working capital improvements that we
have seen in 2005 with improvements in both stock turn and debtor collection
we continue to maximise the efficeincy of our property portfolio pursuing relocation opportunities and surplus property
sales which maximise value
development of the group following the gross
addition of a record 241 branches of which 171 is represented by
the wickes acquisition at 31 december 2005 we traded from
5 brands across 983 locations the table demonstrates our
continued expansion in early 2006 there is significant scope for
expansion across all 5 brands – 4 in merchanting and 1 in diy
retail in 2005 we continued the expansion of the 4 brand
networks in our merchanting division
the acquisition of wickes represented a major
strategic move for the group opening a further channel for the
distribution of building materials this market is worth some £16 billion involving groups of customers not previously well served by
the group subsequent to the acquisition we have as expected found wickes to be an excellent business with a robust and
attractive business model an experienced and capable management team and significant potential to expand in the more difficult
than expected trading conditions experienced in 2005 wickes’ profits have held up more strongly than all other diy chain operators
this underlines the resilience of the business and its attractive position in the market
in acquiring wickes we estimated that the diy market would turn down but not by as much as the eventual out turn with
the prospect of further synergies attractive operational gearing and expansion potential and prospects for a return of normal market
growth we are confident of generating attractive returns from this investment
environment the group recognises its corporate responsibility to carry out its operations whilst minimising
environmental impacts we continue to maintain accreditation of our environmental management system to the iso 14001 standard
no significant changes were made to our environmental policy during 2005 we aim to comply with applicable environmental
legislation prevent pollution and minimise the extent of environmental damage and continuously improve our environmental
performance
environmental improvement plan we have continued the implementation of our environmental improvement plan
where our targets and performance data are based on a measure of output per £ of relevant sales the sales figure is inflation adjusted
to relate our progress to the volume of business transacted the charts presented show data from a combination of specific
measurements and some estimates for the group excluding wickes though wickes figures for the full year of 2005 are described in
the text for information wickes data will be integrated into the total group figures in future years
tra vis perkins plc
10
growing and improving the network
492 18
acquisition 31 dec
2004
31 dec
2005
7 march
2006
net 2006
movement
to date
brown field consolidation
25 2 6 533 539
72 1 2 2 1 73 74
21 2   23 23
166  17 5  178 178
 171 5   176 176
751 190 51 9 7 983 990
tp 492
acquisition 31 dec
2004
31 dec
2005
7 march
2006
net 2006
movement
to date
brown field consolidation
keyline 72
ccf 21
city plumbing 166
wickes
total branches 751
18 25 2 6 533 539
1 2 2 1 73 74
2   23 23
 17 5  178 178
 171 5   176 176
190 51 9 7 983 990 carbon dioxide “co
2
” emissions our co 2
emissions arise from fuel usage by commercial vehicles and
forklift trucks consumption of fuel oil for heating gas and
electricity consumption and as from 2004 car drivers’ business
miles total emissions are estimated at 63800 tonnes in 2005
in the past three years we have transferred electricity supply for
our largest consumption sites including our head office
buildings and a majority of our branches to carbon neutral
sources we now estimate that about ninety five per cent of our
total electricity demand is satisfied from these carbon free
sources – this has been the main reason for our reduction in co 2
emissions for wickes we estimate the emissions to have
amounted to a further 40800 tonnes for the full year of 2005
giving a total annual emission level of 104600 tonnes our new
target is to achieve a reduction of five per cent in co 2 emissions
per £ of sales for the group by the end of 2008
volatile organic compound “voc” emissions over
the past four years we have achieved a major reduction in
emissions of vocs through a programme of replacement of
organic solventbased treatment fluids with aqueous based
solutions we have reduced this in absolute terms to less than 10
tonnes in 2005 a reduction of 97 per cent compared to 2001
only one plant now remains with organic solventbased
treatment
timber certification we have made excellent
progress over four years increasing the proportion of the raw
material content of our purchases of timber and timber products
that is certified – although we face significant commercial
pressure from competitors with less exacting standards who
aim to sell cheaper non certified products by the end of 2005
estimated certification levels had increased to 70 per cent with
36 per cent from fsc sources and with the balance mainly from
pefc sources with a small volume from sources certified to a
variety of other national standards in use elsewhere we continue to challenge all suppliers who are not currently providing certified
material to work towards certification and as a minimum we ask all suppliers to certify that timber supplied has been handled in
accordance with all relevant legislation wickes have implemented a similar plan in recent years and increased the certified percentage
from 71 per cent in 2004 to 87 per cent in 2005 of which 55 per cent is from fsc sources given our good progress over recent
years we have revised our target for the overall group from 75 per cent by the end of 2006 to 85 per cent by the end of 2008
tra vis perkins plc
11
300
250
200
150
100
50
0
2001 2002 2003 2004 2005
t
94
97
60
50
40
30
20
10
0
2001 2002 2003 2004 2005 2008target
co 2 emissions
tonnes per million £ of sales  inflation adjusted
voc emissions
tonnes
timber and timber product certification
content of certified material as a  of total purchases
t£m
100
80
60
40
20
0
2001 2002 2003 2004 2005 2008target

277 t
57
81
49
t£m
6
22 22
26
20
41
45
66
70
56
85 waste sent to landfill our main emphasis is on the
avoidance of waste as well as the segregation of waste streams
to enhance recycling opportunities and so reduce the cost of
waste disposal in total we estimate our waste sent to landfill in
2005 was just over 57000 tonnes of which 23000 tonnes was
in wickes our target is to achieve a five per cent reduction in the
group tonnage per £ of sales by the end of 2008
fuel consumption and vehicle emissions as we
reported last year a number of filters fitted to our transport fleet
in the first year of our programme failed during 2004 and 2005
241 vehicles or 12 per cent of our total fleet 2004 17 per cent
now have the phase two filter systems fitted – these continue to
operate satisfactorily during 2006 we expect to see the first euro iv compliant vehicles supplied by the manufacturers with these
filtration systems fitted as standard in the meantime we have sent vehicles with filters fitted to the most sensitive locations in
particular within central london
complaints and notifiable events we investigate any complaint received and endeavour to rectify the causes promptly
during 2005 only two complaints were received in our merchanting businesses relating to environmental matters 2004 10 both
related to noise from forklift bleepers and both were resolved through the fitting of less obtrusive white noise warning devices within
wickes there were eight incidents four relating to waste issues two to noise pollution one to housekeeping and the final one relating
to the inappropriate discharge of sewage to a controlled body of water all incidents were promptly rectified
our emergency procedures are designed to ensure that even relatively minor events are reported to the environment
agency there were two events within the merchant businesses that required us to contact the agency during 2005 both relating to
minor spillages of hydraulic fluid that were dealt with immediately on site there were also two reportable incidents arising from
wickes’ operations relating to minor spillages from ruptured vehicle fuel tanks no further action is expected from the relevant
authorities our target remains to have zero complaints or notifiable events we are pleased to report that we had no prosecutions
for environmental matters during 2005
community relations with 990 branches in a
wide variety of locations throughout great britain we recognise
our role in and responsibilities towards the community our
branches are encouraged to support their local community
through involvement in local affairs such as sponsoring
organisations or donating materials
in our merchanting business we raised more than
£350000 for charities during the year at a national level we
support three particular charities the nspcc children first
scotland and macmillan cancer relief the charity committee
is chaired by the company chairman during the course of the
year our staff take part in a variety of activities to support our
chosen charities these activities encourage donations from
tra vis perkins plc
12
waste sent to landfill
tonnes per million £ of yard sales  inflation adjusted
20
40
30
10
0
2001 2002 2003 2004 2005 2008target

33
t£m 9
28
24
31
26
travis perkins’ group chief executive geoff cooper presents cheques
totalling more than £281000 to representatives of the nspcc children 1st
scotland and macmillan cancer relief customers and suppliers as well as our own workforce included above are direct donations
made by the group to these and other charities which in the year amounted to £53794
2004 £124534 in addition we operate a payroll giving scheme through which staff donated
£16713 2004 £18147 to charity during the year
our retail business supports a variety of organisations through a charities aid foundation
account and our colleagues are also able to make a donation to their chosen charities through
a corporate gift aid scheme
travis perkins has been the main sponsor of northampton saints rugby club for the
last five years
people and organisation following the acquisition of wickes we have
implemented a series of changes to our management arrangements and strengthened our
management capabilities a new executive committee of the board has been constituted
comprising the executive directors together with selected managing directors from the group’s
eight businesses and central functions the executive committee formalises preexisiting
arrangements and facilitates more effective management of the wider span of activities now
represented in the group in addition the wickes’ board members have joined the preexisting
group trading board
we have strengthened our property management through the appointment of
martin meech as group property director who joined us in september from a ftse 100 retailer
this will help us in an important aspect of our plans for the further development of the group
through network expansion we replaced the head of our plumbing and heating business with
john frost the managing director responsible for building our highly successful travis perkins’
business in the south west norman bell an external appointee with experience in both the
trade and retail sectors including a brief period at wickes has taken over responsibility for the
south west
the group has been able to deal with the challenges it has faced in 2005 through the
dedication and hard work of its people i visit our branches stores distribution centres mills and
other locations through the year via a regular cycle of visits i am constantly struck by the
commitment skill and enthusiasm displayed by colleagues throughout our business and i would
like to thank all of them for their dedication in what has been a significant year in the group’s
development
g i cooper chief executive
7 march 2006
tra vis perkins plc
13 review of operations our markets for both the retail and merchanting operations have been weaker during 2005 than
we have seen for a number of years these conditions have meant that a major focus of our efforts during the year has been on
efficiency and cost reduction programmes however we have also maintained our strategy to grow the businesses through new
product introduction and network expansion through acquisitions and brown field site openings
we made further progress on improving our merchanting operational capability in 2005 particularly in productivity
management information and relationships with customers
in our retail division we continued and refined our branch network expansion and developed initiatives aimed at improving
the sales performance and staff productivity of likeforlike stores
throughout the business we have seen high inflationary costs on commodity products particularly affecting the heavy
building materials and plumbing and heating categories we have been able to take advantage of cost increases by buying stock
whenever practical prior to cost increases taking effect although distribution costs have come under pressure with increases in oil
prices during the year we have offset much of this increase by investing in our brackmills distribution facility extending the range of
products distributed centrally and by obtaining better buying terms this investment creates a good platform for our planned
expansion of global sourcing
the travis perkins’ branch network was expanded during the year with 18 branches acquired and 25 opened on brown
field sites two branches were consolidated during the year leaving our travis perkins branded network operating from 533 branches
by the end of the year in addition major refurbishment and enhancement programmes were completed at wycombe bristol clifton
hemel hempstead peterborough brackmills distribution centre in northampton ashtoninmakerfield and vauxhall in the tool hire
sector we now have 156 units up from 155 last year we have recently appointed a senior category director for tool hire and we intend
to develop this part of our business vigorously in future our strategy of new branch openings continues to serve us well
within keyline our specialist heavyside merchant the focus during 2005 has been on both deepening and widening our
category focus in addition we have continued to grow the network through the integration of one acquired branch at haddington
near edinburgh and through the opening of the first two brown field sites for this brand at kilmarnock and castle douglas in the
borders two branches were closed during the year in both locations the sales were transferred to other branches leaving this brand
with 73 locations by the end of year
our city plumbing supplies business “cps” had a difficult year in 2005 following the major programme of reorganisation
of the jayhard and bg acquisitions integrated in 2004 during 2005 we changed the management of the division and the new team
tra vis perkins plc
14
chief operating officer’s report for the year ended 31 december 2005 has made good progress with a recovery plan to improve pricing product range availability and
branch administration towards the end of the year we took the opportunity to consolidate a
number of stores that were in poor locations and 5 branches were closed in addition we opened
17 new brown field sites during the year giving a total network of 178 branches for cps by the end
of 2005
ccf our drylining and insulation specialist business performed very well during the
year as the market continued to grow and the ccf branches continued to increase their supply
to our generalist merchanting network during the year we opened two new branches at carlisle
and plymouth and both are performing ahead of expectations we also resited our liverpool
branch to larger premises with sales and profits improving as a result we ended the year with a
total of 23 branches
within our wickes’ operations we have had a similar dual focus on cost reduction and
business growth cost reduction gains have come primarily from procurement of goods for resale
but also from headcount reduction in stores a number of back office functions and from lowering
the cost of boughtingoods and services such as mechanical handling equipment and waste
services we have recently introduced more than 1400 additional products into the wickes’ range
in the extra stores through a programme of space optimisation and have also added significantly
to the range breadth in the standard stores removing a limited number of poorer performing
product categories without losing the benefits of our low assortment model
since the acquisition we have converted two stores from the standard to the extra
format in aylesbury and swansea and opened five new standard stores at salisbury lowestoft
bexhill bicester and wakefield wickes was trading from 176 stores at the end of 2005 including
a total of seven extras taking advantage of our tool hire merchanting expertise we introduced
tool hire in three extra stores during the year – the early indications from this new initiative
are encouraging
continuous improvement we introduced a substantially improved merchanting
management information system during 2005 that provides succinct information in a number of
key result areas “kras” to branch managers as well as to regional and senior management the
system is intranet based and can be interrogated to provide specific information for each branch
as the underlying reasons for a particular level of performance on each kra
the measures are monitored continuously and management review all performances on
an exceptions basis every month kra’s include sales and profit performance labour and
distribution costs stock levels trading customer numbers staff turnover and administration
standards a range of customer service performance parameters are also included within the new
kra system
our successful delivery of the anticipated procurement savings as forecast at the time of
the wickes acquisition has led to a further significant lowering of our overall cost of goods sold ratio
for the group
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15 customers during 2005 we commenced a major programme of customer insight research this initiative will assist us
in developing a stronger understanding of the precise requirements of our wide range of customer segments and will help us to focus
our product and service offer to each segment as well as to target growth with the most attractive segments
ongoing consolidation in the house building sector has presented us with some good opportunities for volume gains
through our key account relationships
suppliers with the acquisition of wickes we have taken the opportunity to review the majority of our supply base through
both the retail and merchanting channels during this year during the integration process we have aligned ourselves increasingly with
those companies that have the greatest potential to be major strategic suppliers to the enlarged group for the long term
a significant proportion of the products sold in wickes are supplied via 3 intermediate warehouses operated by us using
a third party logistics contractor one of these at hemel hempstead suffered an interruption to its warehouse operations in
december as a result of the buncefield oil terminal fire well practiced disaster recovery procedures were operated immediately and
alternate supply arrangements were set up within a matter of hours despite the warehouse being out of operation until midfebruary
the impact on stock availability in stores was relatively low
towards the end of 2005 the quality assurance functions in the merchanting and retail divisions were merged into one group
qa department with responsibility for both product and supplier quality across all group companies one of the prime objectives of
the new department for 2006 is to review all existing product and supplier assessment and approval processes and introduce formal
common documented procedures in addition to product quality the supplier assessment process will also include social ethical
health  safety and environmental issues with a supplier grading structure that identifies the risk by these categories at the end of
2005 we established a full time qa office in china
during 2005 a revised statement of expectations and associated questionnaire was issued for new suppliers this will be
developed further to incorporate requirements into the revised group qa supplier assessment and approval process with suppliers
categorised as high risk being subjected to annual qa audits
nonresponses to the august 2004 survey were actioned with the suppliers concerned during 2005 an updated
categorisation of suppliers surveyed and assessed during 2005 is as follows
risk rating employment category number
low employment including key subsuppliers is wholly within the euoecd 196
medium there is employment outside the euoecd and monitoring systems are in place 65
high there is employment outside the euoecd and monitoring systems are not in place 12
there is employment outside the euoecd and compliance cannot be confirmed 2
275
employees in 2005 we took action to reduce headcount across both trade and retail divisions total employees in the
merchant divisions reduced on a likeforlike basis from 9487 to 9029 at 31 december 2005 with total employees increasing to
9533 when acquisitions and new brown fields are included in wickes there were a total of 4227 employees at the end of the year
a reduction of 349 from the level at the date of the completion of the acquisition
during 2005 we established corporate values which will underpin the behaviour of every colleague in our business from the
chief executive to the yard assistant it is our intention to inculcate these values during 2006 to ensure that the values reflect the way
we go about our business by including our values in our performance management systems recruitment and selection processes
and reward mechanisms we can ensure that this objective is achieved
tra vis perkins plc
16 we recognise that our future growth and prosperity will continue to depend on our ability
to attract and retain the very best employees we believe passionately that the promotion of
knowledgeable experienced and capable management from within the organisation is the route to
success consequently the following mechanisms are in place to enable our colleagues to
maximise their potential


Summary:
 results compared to the previous long run of many years which saw steady annual market growth conditions in 2005
were more challenging in response our management teams have focused on maximising profits from our existing branch network
through cost reduction and productivity improvement as well as continuing to grow our business through brown field developments
and selected acquisitions including wickes
the wickes acquisition is profit enhancing in 2005 reflecting excellent progress in management integration and above
target improvements in procurement and in overhead costs
considerable progress has been made operationally in 2005 our business is now some 50 per cent larger we have added
a record number of new branches and stores productivity gains have been made in merchanting the wickes acquisition our largest
ever has been integrated successfully and debt on a proforma basis has been reduced by over £70 million following completion of
the acquisition of wickes see note 33 we continue to enjoy sector leading operating margins in merchanting and have improved
wickes relative performance so that it now enjoys the highest operating margin amongst its peers
dividend the group continues to be highly cash generative as a result of this and our confidence in the future prospects
of the group the board is recommending a final dividend of 230 pence per share taken together with the interim dividend of
110 pence this represents a total dividend of 340 pence an increase of 115 per cent on the previous year
board of directors andrew simon became a nonexecutive director of the company in february 2006 following
a 23 year career successfully developing a building materials manufacturer as its chief executive and then chairman he has
developed considerable experience as a nonexecutive director from a diverse portfolio of companies
corporate governance during the year the board has continued to review actively all of the major areas of risk to
the group further details of the governance controls can be found under the corporate governance section of the annual report
and accounts
outlook we have made a satisfactory start to 2006 with merchanting volumes ahead of expectations although there
are signs that our markets are likely to recover we expect the first half year to remain challenging with any recovery coming in the
second half year
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chairman’s statement for the year ended 31 december 2005 we have recently seen gradually improving trends in lead indicators consumer confidence
is rising although continued inflation in nondiscretionary living costs will mean any recovery in
spending by consumers particularly for home improvement projects will be gradual the overall
housing market shows some improving trends although these are not yet well established
there has been a recent slow down in the expansion of capacity in both diy and trade
markets some competitor diy stores have closed and the appetite of merchants to expand their
networks has waned whilst expansion in 2005 added about 3 to 4 per cent of new capacity to
each market we expect this to come down to 1 to 2 per cent in the next two years this should
have a beneficial effect on the performance of likeforlike stores and branches the work we have
done to reduce costs and capture synergy benefits and buying gains leaves us well positioned to
benefit from any improvement in volumes in both merchanting and retailing our cash flow remains
strong and we expect to continue to expand our networks and further reduce our net debt
we are approaching the important easter trading period for both our divisions and it is
too early to change expectations for the year as a whole looking ahead we expect that improving
market conditions will mean that our profit performance will be stronger in the second half of 2006
than the corresponding period in 2005
in 2005 we strengthened our business both strategically and operationally and look
forward with confidence to 2006 and beyond
t e p stevenson chairman
7 march 2006
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