Notes to the accounts

For the year ended 31 December 2004

1. Turnover

Turnover represents sales of timber, building and plumbing supplies and equipment rental (excluding VAT) to customers of the group in the United Kingdom.

2. Operating profit after amortisation of goodwill

	2004	2003
	£m	£m
Turnover	1,828.6	1,678.3
Cost of sales	(1,245.3)	(1,156.3)
Gross profit	583.3	522.0
Selling and distribution costs	(297.7)	(276.9)
Administrative expenses	(86.3)	(70.8)
Other operating income	1.5	1.8
Operating profit after amortisation of goodwill	200.8	176.1

Items included above but not disclosed elsewhere:
	2004	2003
	£m	£m
Depreciation and other amounts written off tangible and intangible fixed assets	(49.7)	(42.2)
Profit on sale of plant and equipment	0.2	-
Rental income	1.3	1.4
Hire of vehicles, plant and machinery	(8.5)	(8.8)
Other leasing charges - property	(18.7)	(18.1)

Amounts paid to the Auditors	2004	2003
	£m	£m
Group audit fee (company audit fee: £17k: 2003 £17k)	231	216
Other amounts paid to Auditors - tax compliance	65	65
Other amounts paid to Auditors - tax advisory	70	121

Included within the balance sheet is £205k payable to the auditors in respect of review work undertaken for the Wickes acquisition.

3. Pension arrangements

During the year, the group operated one final salary scheme: the Travis Perkins Pensions and Dependants’ Benefit Scheme (the “Group Scheme”), the assets of which were held in a separate trustee administered fund, funded by contributions from the group companies and the employees.

Contributions are paid to the trustees on the basis of advice from an independent professionally qualified actuary who carries out a valuation of each scheme every three years.

A full actuarial valuation of the Group Scheme was carried out on 30 November 2002, then updated to 31 December 2004 by a qualified actuary.

(a) Major assumptions used by the actuary (in nominal terms)

	At 31 December 2004		At 31 December 2003		At 31 December 2002
Rate of increase in salaries	3.8%		3.8%		3.8%
Rate of increase of pensions in payment	2.8%	(post 1997)	2.8%	(pre 1997)	2.3%	(post 1997)
	3.0%	(pre 1997)	3.0%	(post 1997)	3.0%	(pre 1997)
Discount rate	5.3%		5.4%		5.5%
Inflation assumption	2.8%		2.8%		2.3%

(b) Assets and liabilities in the scheme and the expected rate of return (net of allowance for administration expenses)

	At 31 December 2004		At 31 December 2003		At 31 December 2002
	Expected return	£m	Expected return	£m	Expected return	£m
Equities	7.30%	183.9	7.30%	149.5	7.30%	126.0
Bonds	4.30%	38.4	4.60%	22.3	4.30%	14.6
Corporate bonds	5.10%	31.1	5.10%	20.9	5.30%	8.0
Total fair value of assets		253.4		192.7		148.6
Actuarial value of liability		(381.7)		(314.3)		(271.1)
Deficit in the scheme		(128.3)		(121.6)		(122.5)
Related deferred tax asset		38.5		36.5		36.7
Net pension liability		(89.8)		(85.1)		(85.8)

(c) Analysis of amount charged to operating profit

	2004	2003
	£m	£m
Turnover	1,828.6	1,678.3
Current service cost	10.6	10.3

In consultation with the scheme actuary and the trustees of the pension fund the directors are in the process of fixing the employers’ contribution rate for 2005.

(d) Movement in scheme deficit during year

	2004	2003
	£m	£m
Deficit at 1 January	(121.6)	(122.5)
Current service cost	(10.6)	(10.3)
Contributions	39.2	18.2
Other finance costs	(2.8)	(4.3)
Actuarial loss	(32.5)	(2.7)
Deficit at 31 December	(128.3)	(121.6)

(e) Other pension costs

	2004	2003
	£m	£m
Current service costs charged to the profit and loss account	10.6	10.3
Other finance costs	2.8	4.3
Total amount recognised in the statement of total recognised gains and losses	32.5	2.7
Total pension costs	45.9	17.3

(f) History of experience gains and losses

Difference between the expected and the actual return on scheme assets
	2004	2003	2002
Amount	£10.9m	£14.7m	£(43.1)m
Percentage of scheme assets	4.3%	7.6%	29.0%
Experience gains and losses on scheme liabilities
Amount	£0.1m	£0.1m	£(15.4)m
Percentage of the present value of scheme liabilities	-	-	5.7%
Effect of changes in assumptions underlying the present value of scheme liabilities
Amount	£(43.5)m	£(17.5)m	£(32.7)m
Percentage of the present value of scheme liabilities	11.4%	5.6%	12.1%
Total amount recognised in the Statement of Total Recognised Gains and Losses
Amount	£(32.5)m	£(2.7)m	£(91.2)m
Percentage of the present value of scheme liabilities	8.5%	0.9%	33.6%

(g) Change in assumptions

Of the change in assumptions loss of £(43.5) million, £(36) million reflects effect of increased longevity assumptions and £(7.5) million reflects the change in the discount rate.

Defined contribution schemes

There is one defined contribution scheme in the group. Contributions to defined contribution schemes in the year were £0.4 million (2003: £0.1 million).

4. Information regarding employees and directors

(a) Average number of persons employed

	2004	2003
	No.	No.
Sales	6,846	6,868
Distribution	1,537	1,347
Administration	1,002	984
	9,385	9,199

(b) Staff costs

	£m	£m
Wages and salaries	(186.4)	(174.4)
Social security costs	(18.1)	(16.2)
Other pension costs	(10.8)	(10.4)

Disclosures on directors’ share options, remuneration, long-term incentive schemes, pension contributions and pension entitlements required by the Companies Act 1985 and those specified for audit by the Financial Services Authority are shown within the Remuneration Report and Audited information form part of these audited financial statements.

5. Net interest payable

	2004	2003
	£m	£m
Interest on overdrafts and short term loans repayable within 5 years	(7.5)	(9.1)
Interest on unsecured loans	(0.6)	(0.6)
Total interest payable	(8.1)	(9.7)
Interest receivable and similar income	0.5	0.6
Net interest payable	(7.6)	(9.1)

Interest cover is 28.7 times (2003: 21 times). It is calculated by dividing operating profit before goodwill amortisation by the net interest payable (excluding other finance costs).

6. Other finance costs

	2004	2003
	£m	£m
Expected return on scheme assets	14.3	10.8
Interest on pension liabilities	(17.1)	(15.1)
Net cost	(2.8)	(4.3)

7. Tax on profit on ordinary activities

(a) Tax charges

Current tax
		2004	2003
		£m	£m
UK corporation tax at 30%	- current year	50.1	51.7
	- prior year	0.9	(0.1)
Total current tax		51.0	51.6

Deferred tax at 30%
Origination and reversal of timing differences	- current year	10.2	2.3
	- prior year	(0.9)	(0.1)
Total deferred tax		9.3	2.2
Total tax on profit on ordinary activities		60.3	53.8

(b) Tax reconciliation

The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows.

Group profit on ordinary activities before tax	%	£m	%	£m
	2004		2003
Tax on group profit on ordinary activities at standard UK corporation tax rate of 30%	30.0%	57.1	30.0%	48.8
Effects of:
Net expenses not deductible for tax purposes (principally goodwill amortisation)	3.3%	6.2	3.5%	5.7
Capital allowances in excess of depreciation	(1.2)%	(2.2)	(0.7)%	(1.1)
Depreciation on non-qualifying property	0.8%	1.6	0.7%	1.2
Gains on share options exercised during period	(2.3)%	(4.6)	(1.1)%	(1.8)
Other timing differences (principally pension scheme payments)	(4.2)%	(8.0)	(0.7)%	(1.1)
Prior period adjustment	0.4%	0.9	-	(0.1)
Group current tax charge for year	26.8%	51.0	31.7%	51.6

Deferred tax of £10.2 million (2003: £10.3 million) has not been provided on revalued fixed assets and fixed assets subject to rollover relief. At present, it is not envisaged that any tax will become payable in the foreseeable future.

The group’s planned level of capital investment is expected to remain at similar levels. Therefore, it expects to be able to claim capital allowances in excess of depreciation in future years, at a similar level to the current year.

The taxation charge is based on profit before tax for the year at the UK standard rate. There is no tax charge on profits on disposal of properties due to claims for rollover relief for which no deferred taxation provision has been made, or a tax credit in respect of the amortisation of goodwill.

8. Equity dividends

	2004	2003
	£m	£m
Interim 9.5 pence per share (2003: 7.6 pence per share)	11.0	8.6
Proposed final 21.0 pence per share (2003: 16.8 pence per share)	25.3	19.0
	36.3	27.6

9. Earnings per ordinary share

(a) Basic earnings per ordinary share

Basic earnings per ordinary share are calculated from the following ratio:
	2004	2003
Profit on ordinary activities after taxation	£130.1m	£108.9m
Average number of shares in issue	114,232,096	112,782,720

(b) Diluted earnings per ordinary share

Diluted earnings per ordinary share are calculated from the following ratio:
	2004	2003
Profit on ordinary activities after taxation	£130.1m	£108.9m
Average number of shares including outstanding options	115,554,686	114,359,686

The difference in the average number of shares in issue used as the denominator for the calculations of basic and diluted earnings per share is due to the premium element of share options still outstanding at the end of each financial period, based on the average mid-market price for that year. The adjustment to the number of shares is:

	2004	2003
	No.	No.
Premium element of share options based on average mid-market share price for the year	1,322,590	1,576,966

(c) Adjusted earnings per ordinary share

Adjusted earnings per ordinary share which are calculated based upon earnings before amortisation of goodwill and are presented in addition to the basic earnings per share calculated in accordance with FRS 3 and FRS 14 since, in the opinion of the directors, this presents a better like-for-like comparison of the earnings of the group between the relevant periods.

Basic earnings per share may be reconciled to adjusted earnings per share (before amortisation of goodwill) as follows:

	2004	2003
Adjusted earnings per ordinary share	129.1p	110.0p
Amortisation of goodwill	(15.2)p	(13.5)p
Basic earnings per ordinary share	113.9p	96.5p

10. Tangible fixed assets

Cost or valuation
	The Group					The Company
	Freehold	Long leases	Short leases	Plant and equipment	Total	Total¹
	£m	£m	£m	£m	£m	£m
At 1 January 2004	167.3	16.7	10.0	191.4	385.4	0.3
Additions	14.2	2.4	3.5	47.2	67.3	-
Additions from acquired businesses	5.2	-	0.4	2.8	8.4	-
Disposals	(0.5)	-	-	(16.5)	(17.0)	-
At 31 December 2004	186.2	19.1	13.9	224.9	444.1	0.3
Accumulated depreciation
At 1 January 2004	12.0	1.3	1.7	85.7	100.7	0.2
Charged this year	3.7	0.4	0.9	27.3	32.3	-
Disposals	(0.1)	-	-	(15.1)	(15.2)	-
At 31 December 2004	15.6	1.7	2.6	97.9	117.8	0.2
Net book value
At 31 December 2004	170.6	17.4	11.3	127.0	326.3	0.1
At 31 December 2003	155.3	15.4	8.3	105.7	284.7	0.1

¹ Total company fixed assets comprise plant and equipment only.

The cost element of the fixed assets carrying value is analysed as follows:

	The Group					The Company
	Freehold	Long leases	Short leases	Plant and equipment	Total	Total¹
	£m	£m	£m	£m	£m	£m
At valuation	78.6	6.2	2.6	-	87.4	-
At cost	107.6	12.9	11.3	224.9	356.7	0.3
	186.2	19.1	13.9	224.9	444.1	0.3

Those freehold and leasehold properties included at valuation in the consolidated balance sheet were revalued at their open market value on an existing use basis. The valuations were performed as at 31 December 1999 by an independent professional valuer, Lambert Smith Hampton, Consultant Surveyors and Valuers.

Included within freehold property is land with a value of £77.2 million (2003: £69.4 million) which is not depreciated.

The net book value of plant and equipment includes approximately £0.2 million (2003: £0.2 million) within the group figures and £nil (2003: £nil) within the company figures in respect of assets held under finance leases.

Comparable amounts determined according to the historical cost convention:

Net book value
	The Group					The Company
	Freehold	Long leases	Short leases	Plant and equipment	Total	Total¹
	£m	£m	£m	£m	£m	£m
Cost	177.2	18.0	18.8	224.9	438.9	0.3
Accumulated depreciation	(34.7)	(2.9)	(5.6)	(97.9)	(141.1)	(0.2)
At 31 December 2004	142.5	15.1	13.2	127.0	297.8	0.1
At 31 December 2003	126.8	13.4	9.9	105.7	255.8	0.1

11. Intangible assets - goodwill

Cost	£m
	The Group
At 1 January 2004	338.3
Acquisitions in the current year	19.1
At 31 December 2004	357.4
Accumulated amortisation
At 1 January 2004	52.6
Provided in the year	17.4
At 31 December 2004	70.0
Net book value
At 31 December 2004	287.4
At 31 December 2003	285.7

12. Fixed asset investments

	The Group		The Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Shares in group undertakings	-	-	574.3	558.1
Investment properties	3.9	4.3	-	-
	3.9	4.3	574.3	558.1
Provision for impairment	-	-	(4.6)	(4.6)
	3.9	4.3	569.7	553.5

(a) The principal operating subsidiaries whose results and assets affect the results and assets of the group

Subsidiary	Registered office
Travis Perkins Trading Company Limited (Builders merchants)	Lodge Way House, Harlestone Road, Northampton, NN5 7UG.
Keyline Builders Merchants Limited (Builders merchants)	Southbank House, 1 Strathkelvin Place, Kirkintilloch, Glasgow G66 1HX.
Travis Perkins (Properties) Limited (Property management company)	Lodge Way House, Harlestone Road, Northampton, NN5 7UG.
City Plumbing Supplies Holdings Limited (Plumbers merchants)	Lodge Way House, Harlestone Road, Northampton, NN5 7UG.
CCF Limited (Ceiling and dry lining distribution)	Lodge Way House, Harlestone Road, Northampton, NN5 7UG.

The directors have applied s231 of the Companies Act 1985 and therefore list only significant subsidiary companies.

All subsidiaries of the group are 100 per cent owned. Each company is registered and incorporated in England and Wales, other than Keyline Builders Merchants Limited and five dormant companies, which are registered and incorporated in Scotland, and City Investments Limited, which is registered and incorporated in Jersey.

(b) Additional information in respect of movements in fixed asset investments

	The Group	The Company
	Investment properties	Shares in group undertakings
	£m	£m
At 1 January 2004	4.3	553.5
Revaluation	(0.4)	-
Acquired during the year	-	16.2
At 31 December 2004	3.9	569.7

At 31 December 2004, the directors revalued the investment properties at their open market value.

The comparable net book value for investment properties determined according to the historical cost convention as at 31 December 2004 is £0.8 million (2003: £0.8 million). The amount of accumulated depreciation charged to arrive at these values is negligible.

13. Stocks

Stocks consist of goods for resale.

14. Debtors

	The Group		The Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Trade debtors	230.8	211.9	-	-
Amounts owed by subsidiaries	-	-	126.7	124.9
Other debtors	44.2	43.5	3.4	3.3
Prepayments and accrued income	12.8	10.0	-	0.3
	287.8	265.4	130.1	128.5

15. Properties held for resale

	The Group
	£m
At 1 January 2004	0.2
Disposals	(0.2)
At 31 December 2004	-

16. Cash at bank and in hand

Included within cash at bank and in hand was £0.7 million (2003: £0.7 million) held by employee related trusts. These funds can only be used to purchase ordinary shares in the company in order to satisfy obligations under the executive share option schemes and employee sharesave schemes as set out in Share Options or to provide other benefits to employees.

17. Creditors: amounts falling due within one year

	The Group		The Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Bank overdrafts	-	-	63.5	73.5
Bank loans	55.0	80.0	55.0	80.0
Obligations under finance leases	0.1	0.1	-	-
Unsecured loan notes	9.0	12.2	9.0	12.2
Trade creditors	238.9	214.9	-	-
Corporation tax	22.6	25.9	-	-
Other taxation and social security	20.9	17.4	1.2	-
Other creditors	18.0	15.3	5.2	1.7
Accruals and deferred income	15.6	15.2	1.7	1.3
Dividends proposed	25.3	19.0	25.3	19.0
	405.4	400.0	160.9	187.7

18. Creditors: amounts falling due after more than one year

	The Group		The Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Bank loans	65.0	70.0	65.0	70.0
Obligations under finance leases	-	0.1	-	-
Amounts due to subsidiaries	-	-	238.4	222.7
	65.0	70.1	303.4	292.7

19. Provisions for liabilities and charges

	The Group
	Deferred tax	Other provisions	Total
	£m	£m	£m
At 1 January 2004	10.2	9.9	20.1
Charged to profit and loss account	9.3	5.7	15.0
Applied during year	-	(2.9)	(2.9)
At 31 December 2004	19.5	12.7	32.2

Other provisions relate principally to insurance claims where the final settlement date is uncertain. The company has a deferred tax asset of £0.4m at December 2004 (2003: £nil). For disclosure purposes, this has been included within other debtors in note 14. The company has no unprovided liability to deferred tax (2003: £nil).

The provided and unprovided amounts of deferred taxation are:	Provided		Unprovided
	2004	2003	2004	2003
	£m	£m	£m	£m
Capital allowances in excess of depreciation	13.7	11.5	-	-
Sale of properties	-	-	10.2	10.3
Investment revaluation reserve	-	-	0.3	0.3
Other timing differences	5.8	(1.3)	-	-
Capital losses	-	-	(0.4)	(0.4)
	19.5	10.2	10.1	10.2

20. Financial instruments

A summary of the group policies and strategies with regard to financial instruments can be found in the finance director’s report. With the exception of currency disclosures shown in note 20(b), the disclosures below exclude short-term debtors, creditors and pension scheme surpluses and deficits.

(a) Interest rate profile of financial assets and liabilities

The interest rate exposures of the group financial assets and liabilities as at 31 December 2004, all of which are denominated in sterling, were as follows:

	Floating
	2004	2003
	£m	£m
Borrowings	(129.1)	(162.4)
Cash at bank, in hand and deposits	116.9	33.9
	(12.2)	(128.5)

Cash at bank, in hand and deposits earn interest at floating rates, based principally on short-term inter-bank rates. Floating rate borrowings bear interest based on short-term inter-bank rates, being LIBOR (applicable to periods of 6 months or less).

Loan notes of £4.7 million issued in 1999 in respect of the Sharpe & Fisher acquisition remain outstanding at 31 December 2004. Interest on these loan notes is determined at 6 monthly intervals on 31 January and 31 July each year when interest is set at 1/2 per cent below LIBOR. The interest rate was 3.76 per cent during January 2005 and has been set at 4.23 per cent between 1 February and 31 July 2005.

Loan notes of £3.7 million issued as part of the consideration for the acquisition of the business of Broombys Limited, remain outstanding at 31 December 2004. Interest on these loan notes is determined at 6 monthly intervals on 31 January and 30 June each year when interest is set at base rate subject to a minimum of 6 per cent. The interest rate has been set at 6.0 per cent between 1 January 2005 and 30 June 2005.

£0.6 million of loan notes issued during 2002 in respect of the Joseph Sparks and Son Limited acquisition remain outstanding as of 31 December 2004. Interest is payable on 31 March each year at a rate of 0.5 per cent below base rates.

No borrowings are at fixed rates.

(b) Currency exposure

At 31 December 2004, the group had placed unfulfilled orders denominated in foreign currency (principally in US dollars) with suppliers to the value of £5.4 million. In addition it had short term foreign currency trade creditors (principally in US dollars and euros) totalling £0.2 million.

As at 31 December 2004 and 31 December 2003, the group had no currency contracts, including hedging.

(c) Maturity of financial liabilities

(i) The Group
	Bank loans and overdrafts		Other borrowings		Total
	2004	2003	2004	2003	2004	2003
	£m	£m	£m	£m	£m	£m
Borrowings repayable:
Within 1 year	55.0	80.0	9.1	12.3	64.1	92.3
More than 1 year but not more than 2 years	5.0	55.0	-	0.1	5.0	55.1
More than 2 years but not more than 5 years	60.0	15.0	-	-	60.0	15.0
Total borrowings	120.0	150.0	9.1	12.4	129.1	162.4

(ii) The Company
	Bank loans and overdrafts		Other borrowings		Total
	2004	2003	2004	2003	2004	2003
	£m	£m	£m	£m	£m	£m
Borrowings repayable:
Within 1 year	118.5	153.5	9.0	12.2	127.5	165.7
More than 1 year but not more than 2 years	5.0	55.0	-	-	5.0	55.0
More than 2 years but not more than 5 years	60.0	15.0	-	-	60.0	15.0
Total borrowings	183.5	223.5	9.0	12.2	192.5	235.7

There are cross-guarantees on the overdrafts between group companies.

The loan notes of £4.7 million issued in 1999 to acquire Sharpe & Fisher can be redeemed on 1 January and 1 July each year, the final redemption date being 1 January 2010. The £3.7 million of loan notes issued for the acquisition of the business of Broombys Limited are redeemable on 30 June and 31 December each year until the final redemption date of 30 June 2015. The loan notes of £0.6 million issued for the acquisition of Joseph Sparks and Son Limited have a final redemption date of 31 March 2005.

The principal bank loans, which are in the name of Travis Perkins plc, have been guaranteed by the companies listed in Note 12(a).

The finance leases are secured on the assets to which they relate.

(d) Borrowing facilities

The group has various undrawn borrowing facilities available at 31 December 2004 in respect of which all conditions had been met:

Borrowings expiring:	£m	£m	£m
	Overdrafts	Uncommitted	Total
Within 1 year	54.0	78.0	132.0

In addition, at 31 December 2004, the group had an undrawn committed credit facility of £1.2 billion, expiring in December 2009, established for the purposes of acquiring Wickes. On 11 February 2005, the date on which Wickes was acquired the £120 million drawn committed facilities, the £78 million uncommitted facilities and a £29 million overdraft facility were repaid or withdrawn.

The fair values of financial assets and financial liabilities are as follows:

	Book value		Fair value
	2004	2003	2004	2003
	£m	£m	£m	£m
Cash at bank, in hand and deposits	116.9	33.9	116.9	33.9
Loans (including finance leases)	(120.1)	(150.2)	(120.1)	(150.2)
Loan notes	(9.0)	(12.2)	(9.0)	(12.2)
	(12.2)	(128.5)	(12.2)	(128.5)

The fair value has been calculated by discounting expected cash flows at prevailing rates at 31 December. There are no material differences between book and fair values on this basis.

21. Called up share capital

Ordinary shares of 10p	No.	£m	No.	£m
	Authorised		Allotted
At 1 January 2004	135,000,000	13.5	113,387,252	11.3
Market placing of shares	-	-	5,000,000	0.5
Allotted under share option schemes	-	-	2,132,127	0.3
At 31 December 2004	135,000,000	13.5	120,519,379	12.1

The net contribution received for the issue of shares during the year was £90.6 million.

Details of the share option schemes are given in the Remuneration Report.

22. Reserves

(a) The Group

	Non-distributable revaluation reserve
	Investment property	Trading property	Share premium account	Retained profits	Total reserve
	£m	£m	£m	£m	£m
At 1 January 2004	3.5	27.1	69.4	365.7	465.7
Retained profit for the year	-	-	-	93.8	93.8
Actuarial loss recognised	-	-	-	(30.5)	(30.5)
Difference between depreciation of assets on a historical basis and on a revaluation basis	-	(0.4)	-	0.4	-
Revaluation of investment properties	(0.4)	-	-	-	(0.4)
Issue of shares	-	-	89.8	-	89.8
At 31 December 2004	3.1	26.7	159.2	429.4	618.4

	2004	2003
	£m	£m
Profit and loss account reserve excluding pension deficit	519.2	450.8
Pension deficit	(89.8)	(85.1)
Profit and loss account reserve including pension deficit	429.4	365.7

The cumulative total of goodwill written off directly to reserves for acquisitions from 23 December 1989 to 31 December 1998 is £40.1 million. The aggregate information for the accounting periods prior to this period is not available.

(b) The Company

	Share premium account	Retained profits	Total reserves
	£m	£m	£m
At 1 January 2004	68.3	149.6	217.9
Retained profit for the year	-	13.8	13.8
Issue of shares	89.8	-	89.8
At 31 December 2004	158.1	163.4	321.5

23. Profit of parent company

As permitted by s230 of the Companies Act 1985, the profit and loss account of the parent company is not presented as part of these financial statements.

Group profit dealt with in the parent company accounts:	£m	£m
	2004	2003
Trading loss	(7.3)	(7.4)
Group dividends receivable	57.4	51.6
	50.1	44.2
Dividends payable to shareholders	(36.3)	(27.6)
Retained profit for the year	13.8	16.6

24. Operating lease commitments

At 31 December 2004, the group was committed to making the following payments during the next year in respect of operating leases:

Leases which expire:	£m	£m	£m	£m
	Land and buildings		Other
	2004	2003	2004	2003
Within 1 year	0.2	0.5	0.2	0.4
More than 1 year but not more than 2 years	0.4	0.5	0.1	0.4
More than 2 years but not more than 5 years	1.7	1.5	0.2	0.1
After 5 years	19.1	16.4	-	-
	21.4	18.9	0.5	0.9

25. Capital commitments

	The Group		The Company
	2004	2003	2004	2003
	£m	£m	£m	£m
Contracted for but not provided in the accounts	20.5	8.2	-	-

26. Related party transactions

Certain directors of the company have made purchases from group companies during the year. These transactions were on normal arms length terms at prices that were available to any member of staff. Total purchases did not exceed £1,500 for any individual director other than Frank McKay (£17,039) during the year ended 31 December 2004. The total balance outstanding at 31 December 2004 did not exceed £1,500 for any director. The board of directors, excluding the relevant director in each case, are of the opinion that none of these transactions are material to either the company or the specific director.

27. Reconciliation of operating profit to net cash inflow from operating activities

	2004	2003
	£m	£m
Operating profit after amortisation of goodwill	200.8	176.1
Depreciation charges	32.3	26.9
Amortisation of goodwill	17.4	15.3
Profit on sale of fixed assets	(0.2)	-
Increase in stocks	(15.7)	(10.8)
Increase in debtors	(14.3)	(0.4)
Increase in creditors	27.5	27.3
Additional cash payments to the pension scheme	(25.8)	(3.6)
Net cash inflow from operating activities	222.0	230.8

28. Reconciliation of net cash flow to movement in net debt

	2004	2003
	£m	£m
Increase in cash in year	12.5	6.7
Cash inflow from debt	33.3	27.0
Cash outflow/(inflow from) to increase/(to decrease) liquid resources	70.5	(2.5)
Movement in net debt in year	116.3	31.2
Net debt at 1 January	(128.5)	(159.7)
Net debt at 31 December	(12.2)	(128.5)

29. Analysis of movements in cash, short term deposits and debt

	At 1 January 2003	Cash flow	At 31 December 2003	Cash flow	At 31 December 2003
	£m	£m	£m	£m	£m
Cash on call	-	6.4	6.4	12.5	18.9
Bank overdraft	(0.3)	0.3	-	-	-
	(0.3)	6.7	6.4	12.5	18.9
Short term deposits	30.0	(2.5)	27.5	70.5	98.0
Cash in balance sheet	29.7	4.2	33.9	83.0	116.9
Finance leases	(0.3)	0.1	(0.2)	0.1	(0.1)
Bank loan	(175.0)	25.0	(150.0)	30.0	(120.0)
Unsecured loan notes	(14.1)	1.9	(12.2)	3.2	(9.0)
Net (debt)/cash	(159.7)	31.2	(128.5)	116.3	(12.2)

30. Purchase of business undertakings

During the year the group acquired eight limited companies and the assets of nineteen other businesses, details of which on an individual basis are not material to the financial statements. All the acquisitions were accounted for using the acquisition method of accounting.

On acquisition, the value of the assets of each business have been reviewed and where appropriate, been revalued to their fair values based on either an independent valuation or a value based on group accounting policies. These fair value and accounting policy alignments, that are included below, are based on the best information available currently and as such are provisional for all businesses acquired during the year ended 31 December 2004. Further adjustments may be necessary during 2005 when additional information is available.

Net assets acquired	£m	£m	£m	£m
	2004			2003
	Book value acquired	Fair value acquired	Fair value acquired	Fair value acquired
Tangible fixed assets	8.6	(0.2)	8.4	5.7
Stock	6.8	-	6.8	15.2
Debtors	8.1	-	8.1	14.6
Cash	1.6	-	1.6	4.6
Creditors	(3.5)	-	(3.5)	(14.2)
Taxation	0.1	-	0.1	-
Bank overdrafts and loans	(0.4)	-	(0.4)	(3.9)
Deferred tax	-	-	-	(0.1)
	21.3	(0.2)	21.1	21.9
Goodwill			19.1	51.1
			40.2	73.0
Satisfied by cash			40.2	73.0

	Fair value acquired	Goodwill	Cash paid	Net Cash acquired	Enterprise value
	£m	£m	£m	£m	£m
Other	21.1	19.1	40.2	(1.2)	39.0

On the day following completion, the trade and assets of each acquired company were transferred into another Travis Perkins’ subsidiary. The acquired subsidiary companies are now dormant.

The individual results and cash flow effects of the acquired businesses are not sufficiently material to warrant separate disclosure. The acquired branches have now been fully integrated into the Travis Perkins’ group accounting systems. As such, the directors are unable to calculate meaningful cash flow effects of each of the other acquired businesses for the period of Travis Perkins’ ownership without incurring undue expense and delay.

31. Gearing

	2004	2003
Net debt	£12.2m	£128.5m
Shareholders’ funds	£630.5m	£477.0m
Gearing	1.9%	26.9%

32. Free cash flow

	2004	2003
Like-for-like free cash flow, as referred to in the finance director’s report, is derived as follows:	£m	£m
Net debt at 1 January	(128.5)	(159.7)
Net debt at 31 December	(12.2)	(128.5)
Movement in net debt in year	116.3	31.2
Adjustment in respect of creditors paid in advance	-	(16.6)
Dividends	30.0	23.7
Special pension contributions	25.8	3.6
Net cash outflow for expansion capital expenditure	29.3	17.4
Net cash outflow for acquisitions	39.0	72.3
Shares issued	(90.6)	(3.5)
Like-for-like free cash flow	149.8	128.1

The definition of like-for-like free cash flow has been amended during the year to mirror that typically used by investment analysts.

33. Return on equity

	2004		2003
	£m	£m	£m	£m
Return on equity, as referred to in the finance director’s report, is derived as follows:
Profit on ordinary activities before taxation and goodwill amortisation		207.8		178.0
Closing net assets	630.5		477.0
Pension deficit	89.8		85.1
Closing goodwill written off	110.1		92.7
	830.4		654.8
Opening net assets	477.0		395.4
Pension deficit	85.1		85.8
Opening goodwill written off	92.7		77.4
	654.8		558.6
Average net assets*		709.2		606.7
Return on equity		29.3%		29.3%

* Due to the share issue in December 2004, a weighted average net assets has been used to calculate the average net assets for 2004.

34. Earnings before interest, tax, depreciation and amortisation

Earnings before interest, tax, depreciation and amortisation (“EBITDA”), as referred to in the finance director’s report is derived as follows:

	2004	2003
	£m	£m
Profit on ordinary activities before interest and taxation	200.8	176.1
Goodwill amortisation	17.4	15.3
Depreciation	32.3	26.9
EBITDA	250.5	218.3

35. Post balance sheet event

As set out in the chairman’s statement, on 11 February 2005, the group acquired Wickes for a total consideration of approximately £980 million, representing a basic purchase price of £950 million debt free, plus the movement in working capital between 31 October 2004 and the date of completion of £10 million and notional interest of £20 million.

Annual report & accounts for 2004