Leading market positions

The total UK construction and home improvement materials market is worth approximately £65bn. Travis Perkins' addressable market is £34bn which excludes certain trade and DIY categories and direct from manufacturer to end-user supplies.

Building materials market (£65bn)

Building materials market (£65bn) – Addressable trade market £27bn; Addressable market £34bn; Addressable retail market £7bn; Non-Addressable retail market £5bn; Direct/contract to trade £20bn; Non-Addressable trade market £6bn;

Addressable market (£34bn) plus adjacent categories (£11bn)

Addressable market (£34bn) plus adjacent categories (£11bn) - Independents £14bn 5,400 branches; Travis Perkins £6bn 1,975 branches;, Nationals £14bn 5,000 branches; Adjacent categories £11bn;

Many of the Group's businesses hold market leading positions (by turnover), and those that do not are generally the number two in their respective market. Therefore the Group is well-positioned to benefit from the UK's continuing economic recovery and further enhance shareholder returns.

The Group's largest nationwide competitors account for less than half the turnover in the Group's addressable markets. Independents and regional, largely private, companies make up the remainder of the market. There are categories with an addressable market of approximately £11bn, in which the Group does not currently operate. These categories provide potential opportunities into which the Group may extend its reach.

Market Trends

The UK has a long history of significantly under-investing in its housing stock. According to a recent survey by the Office for National Statistics, there are approximately 28 million homes in the UK and only 60% of these are maintained to a satisfactory standard. A trend towards smaller family units results in around 230,000 new households being formed each year. The combination of under-investment in existing dwellings and new household formation provides a reasonable expectation of sustainable medium to long term growth in both the new build housing and the repair, maintenance and improvement ("RMI") markets.

Lead indicators

The Group's businesses supply greater volumes of product to the more resilient RMI market, albeit with a small, but important component of turnover coming from the supply of material to the new build market.

The Group tracks several market indicators from the housing, retail and construction sectors in order to determine levels of investment and inform the Group's trading stance. Secondary housing transactions and consumer confidence remain the key indicators that most closely correlate to future performance. Traditionally there has been a lag of around nine months between a change
in those key indicators and a corresponding uplift in demand volumes.

There was a significant improvement in the key lead indicators the Group monitors as the UK recovery took hold in 2013. Whilst it is still relatively early in the recovery of UK construction industry, the key indicators monitored by the Group have steadied during the course of the year and are now at levels that the Group believes are consistent with those needed to support sustained medium-term growth in RMI spend, new housing construction and new commercial and industrial development.