PROPERTY PROPE TY BRIEF EFING NG. July 2 201 015 Pro rope pert rty B Bri riefing. J Jul uly 201 015 1
Agen genda Int ntrodu duct ction John Carter Pr Prope perty ty at T Travis vis Perkin kins Martin Meech Q&A Q& John, Tony & Martin Refres Ref eshm hment ent br brea eak All Branc Br nch t h tours All Wrap ap up up All Pro rope pert rty B Bri riefing. J Jul uly 201 015 2
Our ur growt wth not h not cons constrai ained b d by the he mar market • Majority of the markets we compete in are highly fragmented Mark arket t 1 • Proliferation of small family-owned businesses frag agmentati tation • Our businesses are #1 or #2 in each of our markets, but with relatively low market shares • Sour urcing ng & sup upply c cha hain: n: sourcing terms, range, stocking and distribution efficiency Str Structu tural al 2 • Br Branc nch net h network: 2,000 locations, strong covenant, flexibility to optimise, development value ad advan antag tages • IT: T: selective sharing of software platforms and volume hardware purchasing • Range & nge & value: ue: strong promotions & KVI pricing, range extension, own label development, availability Su Superi rior r 3 • Space: e: new branch & store opening programme with implants intensifying space prop opos ositions • Cha hannel nnel, f format & & cus ustomer er ser ervice: e: investment in online channels, new formats and better service Frag agmente ted mark arkets ts + + str truc uctur tural al ad advan antag tage + + sup uperi rior or prop opos ositi tion on = sus ustai tainab able le m mark arket t shar are g gai ains Pro rope pert rty B Bri riefing. J Jul uly 201 015 3
Lev ever ers of valu lue c e crea eatio tion Portf tfolio lio Scale cale ma managemen ement advantag ad antage Optim ptimising ising • Streamlined central netw ne twork • Supply chain functions Custo stomer investment • Devolved innovatio inno ation • TP expansion & • Leverage property management modernisation capability responsibility • Improved value • Wickes national footprint • Group sourcing • Disciplined planning • Extended range benefits & capital allocation • Plumbing & Heating • Product development format clarity • Shared technology • Regular market • Format renewal investment updates • Implants intensify returns • Technology enabled • Trade parks • Multi-channel Enabled through people & evolution of unique culture Pro rope pert rty B Bri riefing. J Jul uly 201 015 4
PR PROPE PERTY. Martin Mar n Meec eech Group Pr p Prope perty ty Directo tor Pro rope pert rty B Bri riefing. J Jul uly 201 015 5
Agen genda 1. Property strategy p7 2. Current estate p14 3. How we operate p24 4. Creating value in the future p32 Pro rope pert rty B Bri riefing. J Jul uly 201 015 6
PROPE PROPERTY TY STRATEGY. Pro rope pert rty B Bri riefing. J Jul uly 201 015 7
Creat ating ng v val alue ue f from om pr prope operty • Assess strategic • Successful property requirements for hold /sell process requires strong underlying businesses • Release capital through sale or sale & leaseback • Business requirements always come first • Reinvest capital back into the businesses • Enhance existing sites • Identify optimal location through implants / trade using data / local expertise parks / redevelopment • Assess Group site usage or • Develop freehold site acquisition needed (planning, development • Secure site through approval, construction) freehold / leasehold Pro rope pert rty B Bri riefing. J Jul uly 201 015 8
Proper erty ty s str trate tegy f follo llows G Group busin ines ess s str trateg tegy Group strategy Property strategy • Select required catchments Extend the portfolio • Select best property to fulfil business requirements • Acquire and develop property on behalf of business • Assess capital allocation of property Efficient allocation of capital • Re-balance the portfolio to best returning businesses • Optimise the property portfolio Maximise return on capital • Continually assess business performance • Move or close sites; extract value where possible Pro rope pert rty B Bri riefing. J Jul uly 201 015 9
An ex experie erienced & & in innovati tive tea team Mar Martin n Meec eech • Recently strengthened team Group Property Director 36 years property experience • Broad & relevant experience (inc. 30 years as corporate property director) Dixons Group • Decision making devolved to the businesses Gateway Supermarkets Halfords and Comet Nick ck Pinne inney Phil hilip J ip Joyce ce Jo L o Lor ord Stev eve B e Ben ennet ett Darre rren S Scre reen Property ty Contracts P&H Consumer G Merchant Financ nance South West Mid & North South East London Dir irec ector 20 years experience 28 years experience 25 years experience 12 years experience 15 years experience Strutt & Parker Home Retail Group CBRE, Homebase, South Street AM Dixons Carphone Morgan Stanley Mercian Developments Capital & Regional plc DSG Retail ltd Kingfisher Joined in 2014 Joined in 2007 Joined in 2015 Joined in 2014 Joined in 2015 Business responsibility Geographic responsibility Pro rope pert rty B Bri riefing. J Jul uly 201 015 10 10
Mat aterial v val alue ue f from om be being ng a a group of oup of compani companies Strong ong ba balance nce s she heet Neg egotia iatin ing t ter erms Flex exib ibil ilit ity y of us use Scale = competitive Decision making held by Combined Group balance advantage: Travis Perkins: sheet: • Local, regional and Opportunity to switch • Access to funding • national levels sites between brands • Funding at better given # of fascias • Attracts high quality financing terms people into team Spread risk exposure • through the cycle • Strong covenant Pro rope pert rty B Bri riefing. J Jul uly 201 015 11 11
Freeho hold v d vs. . Leas aseho hold d – str trateg tegic b ben enef efits its Freeho eehold Lea easeho ehold • Long term site security • Lower up-front cash cost • Flexibility to optimise use • Balance sheet efficiency • Future asset appreciation and • Greater availability of leasehold alternative use properties • Greater flexibility to tailor to • Suitable for small generic sites specific customer needs Aim to in Aim increa ease f e freeh eehold p proportio ion to d driv ive s e super erio ior o oper eratin ing re returns Pro rope pert rty B Bri riefing. J Jul uly 201 015 12 12
Freeho hold v d vs. . Leas aseho hold d – financi nancial al i imp mplicat cation ons Freeho eehold Lea easeho ehold • Current existing use property estate • Current leasehold debt value of value ~£500m ~£1,469m (based on 8x rental costs) • Financed using on balance sheet debt • Shortening business lifecycles • Large immediate capital investment • Small immediate capital investment with on-going lease commitment • Lower on-going property costs • Off balance sheet debt – added back • Direct capital employed – included in to assess LAROCE both ROCE and LAROCE Minim inimal L LAROC ROCE co compr pressio ion ( n (20-30 bps bps o over 5 years) thr hrough in h investment nt in f in freeho hold d pr prope perty Pro rope pert rty B Bri riefing. J Jul uly 201 015 13 13
CURRE RRENT NT ESTATE ES TE. Pro rope pert rty B Bri riefing. J Jul uly 201 015 14 14
Different nt b bus usine ness de demands mands on on pr prope operty t team am Small all / / mediu dium tr trade ade Implant lant / sm / small f all format at Lar arger tr trade ade / / retail tail Distr istrib ibutio tion ce n centr ntre ~15,000ft 2 + Yard ~500 – 5,000ft 2 ~25-30,000ft 2 ~600,000ft 2 Pro rope pert rty B Bri riefing. J Jul uly 201 015 15 15
Trac ack recor cord d of of strong ong or organi anic ne c networ ork g growt wth Mergers & disposals Organic growth Acquisitions Base 2,250 2,000 627 534 477 430 1,750 329 1,500 # Branches 1,250 257 277 203 1,000 151 118 67 39 750 22 12 500 250 - (1) (11) (24) (34) (57) (37) (38) (44) (49) (122) (142) (157) (250) (222) 2000 000 20 2001 2002 20 20 2003 20 2004 20 2005 20 2006 20 2007 2008 20 2009 20 20 2010 2011 11 2012 12 2013 13 2014 14 Year Pro rope pert rty B Bri riefing. J Jul uly 201 015 16 16
What Wh t does es th the e curren ent p t portf tfolio lio lo look lik like? e? Gr Group to tota tal: l: 2,012 fascias (at 31 May 2015) Contracts General Merchanting Travis Perkins 660 Keyline 80 BSS 63 Benchmarx 133 CCF 34 Consumer Wickes 232 Midlands and North 36% Toolstation 200 27% 39% Tile Giant 110 P&H South East 29% CPS 275 (exc. London) 25% 12% PTS 202 9% 23% South West Other 23 London Pro rope pert rty B Bri riefing. J Jul uly 201 015 17 17
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