Travis Perkins plc - COVID-19 and Trading update
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Travis Perkins (TPK)
28 April 2020
Travis Perkins plc - COVID-19 and Trading update
Nick Roberts, Chief Executive, commented:
"In light of the COVID-19 emergency, we have established a new operating model that has kept colleagues and customers safe, operating within Government guidelines, and enabling branches across all of the Group's businesses to remain open. Moreover, we have provided essential services and support to keep the nation's critical infrastructure maintained and operational and the UK's homes warm, dry and safe during this time of need.
"We continue to adapt our operations, applying stringent social distancing and using technology to enable contactless operations, and we are therefore able to respond to the Government's call to ensure that the construction industry can continue to deliver on crucial programmes and projects and be an engine for future economic recovery.
"As we move forward we will continue to adjust our operations, with our foremost priority to keep colleagues and customers safe and the industry supplied with the materials it needs."
AGM The AGM will take place at 9.30am today at the offices of the Company in Northampton. As stated in the AGM Notice on 3 April 2020, in light of the impact of the COVID-19 pandemic the AGM will be held with only the Chairman of the Board and the Company Secretary & General Counsel present, who together will form the quorum for the meeting, with no other attendees. A live audio feed will be accessible to shareholders.
Business operations and trading Since late March, the Group has been running a "service-light" operating model, focusing on serving customers through remote, non-contact channels.
Throughout the early weeks of the lockdown, around a third of our total Merchanting branches and around half of all Plumbing and Heating branches were operating. These sites have been primarily running call and collect or direct delivery services to support essential construction programmes. These include the construction of key NHS assets including the Nightingale hospital network, the ongoing maintenance of national infrastructure and support for the essential repair and maintenance of domestic homes.
Wickes and Toolstation have been operating across the vast majority of their branch networks, with branches acting as fulfilment centres for transactions completed via digital channels for either direct delivery, or with essential items being available for collection within a designated time slot. The Wickes Kitchen & Bathroom design and installation service, usually contributing around a third of Wickes sales, remains closed.
In the first three weeks of April, operating through the service-light model, Group total revenue was approximately one-third of the same period in 2019 on a comparable basis.
In recent weeks, the Group has been working closely with customers, suppliers, trade bodies and the UK Government to develop safe-working protocols which can be applied across the construction supply chain to enable more activity to be carried out safely under lockdown.
Since 20 April, the Group has been carefully opening more of its Merchant branch network, with branches continuing to operate the service-light, non-contact operating model. This will give greater support to large construction firms and subcontractors as they restart construction sites, and give smaller, local trade customers improved access to products. Revenue performance in Wickes and Toolstation has continued to improve with the businesses responding at pace to the changing nature of the trading environment, reconfiguring to significantly increase the capability of distribution networks to cope with the high levels of consumer demand.
Cost base mitigations Actions have been taken to reduce and carefully manage the operating cost base of the Group, with all businesses taking decisive actions to eliminate discretionary spend. In addition, the Group has accessed the Government support schemes which have been put in place.
The closure of branches, particularly across the Merchanting businesses, has led to the furlough of both front line branch teams and colleagues in support functions. Altogether around half of the Group's 30,000 colleagues were furloughed for the first three weeks of the lockdown. Colleagues have been furloughed on full pay, with leadership teams and remaining colleagues working hard to sustain high levels of communication to maintain team cohesion and morale.
In addition, a decision was taken and announced internally on 7 April 2020 by the Board of Directors and the Group Leadership Team to voluntarily reduce their salaries by 20% effective from 1 May for a period of three months.
The Group is benefitting from the business rates holiday, a saving of around £90m for the Group on an annualised basis.
Cash management The Group continues to act to reduce cash commitments in order to conserve liquidity in the short-term, including benefiting from the deferral of VAT payments. Discussions have been held with landlords across the businesses to move the timing of rent payments where possible, including moving rental payments from quarterly in advance to monthly in arrears.
A rigorous review of capital expenditure has been carried out, with discretionary capex not already committed being postponed until there is a greater degree of certainty around any future economic recovery. Maintenance capex, which is primarily focused on the Group's vehicle fleet, has been curtailed in line with the drop in revenue and delivered sales.
Overall, the combination of current trading levels and the mitigations taken to control the overhead cost base means that for the first month of lockdown the Group experienced an overhead cash outflow of around £50m. With more Merchanting branches beginning to open with a corresponding increase in sales volume and the continued progression of trading in the Wickes and Toolstation businesses, the Group expects this cash outflow to reduce over the coming weeks.
Robust financial position maintained The Group continues to maintain a strong liquidity headroom position with a robust balance sheet.
The Group has carried out detailed scenario analysis of liquidity headroom with the key focus being near-term working capital management, and specifically on the recovery of trade debtor values from customers. Collections to date have been encouraging and are further supported by the progressive opening of additional Merchanting branches. With the £400m revolving credit facility (RCF) fully drawn, as at 24 April 2020 the Group had £522m of cash on deposit. The Group maintains a good relationship with its core lending syndicate.
Outlook The Group has adapted its business operations at pace, working with industry and Government to design and implement safe ways of working and accelerating the use of technology for improved customer convenience, and greater flexibility and simplicity. These actions have positioned the Group well to support customers across the wider construction industry as a critical economic engine for growth.
Given the ongoing, considerable level of uncertainty, the Group is unable to provide an accurate assessment on trading and withdrew market guidance on 20 March 2020. Whilst the uncertainty continues with respect to both the duration of the lockdown period and the eventual shape of the UK economic recovery, the Group remains focused on near-term actions to maintain the safety and welfare of its colleagues, customers and suppliers, and to promote safe practices which can enable more construction work to recommence.
Q1 trading As reported in our statement on 20 March, the Group delivered a good performance in the first two and a half months of 2020, continuing the positive momentum from 2019. Performance was then significantly impacted by the COVID-19 pandemic and the lockdown measures introduced in the UK from 24 March.
Enquiries:
Footnotes (1) Like-for-like sales growth for the three month period ended 31 March 2020 compared to the three month period ended 31 March 2019. Total sales growth for the three month period ended 31 March 2020 compared to the three month period ended 31 March 2019.
(2) Wickes like-for-like and total sales growth for the 13 week period ended 28 March 2020 compared to the 13 week period ended 30 March 2019. |
| ISIN: | GB0007739609 |
| Category Code: | QRF |
| TIDM: | TPK |
| LEI Code: | 2138001I27OUBAF22K83 |
| Sequence No.: | 60696 |
| EQS News ID: | 1030975 |
| End of Announcement | EQS News Service |
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