DJ Travis Perkins: Publication of 2018 Annual Report
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Travis Perkins (TPK)
Travis Perkins: Publication of 2018 Annual Report
26-Feb-2019 / 16:13 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
Publication of the Annual Report 2018
Further to the release of its results announcement this morning, Travis Perkins plc
(the "Company") announces that it has today published its Annual Report for the
year ended 31 December 2018. The Company's Annual Report 2018 can be viewed on the
Company's website - www.travisperkinsplc.co.uk [1]
In accordance with rule 9.6.1 of the Listing Rules, copies of the following
documents have been submitted to the National Storage Mechanism and will shortly be
available for inspection at www.morningstar.co.uk/uk/NSM [2]
- Annual Report and Accounts 2018;
A condensed set of the Company's financial statements and information on important
events that have occurred during the year and their impact on the financial
statements were included in the Company's announcement. That information together
with the information set out below which is extracted from the Annual Report
constitute the requirements of Disclosure and Transparency Rule ("DTR") 6.3.5 which
is to be communicated via a Regulatory Information Service in unedited full text.
This announcement is not a substitute for reading the full Annual Report. Page and
note references in the text below refer to page numbers in the Annual Report. To
view the preliminary announcement, visit the Company's website:
www.travisperkinsplc.co.uk [1]
Enquiries:
Graeme Barnes
Graeme.barnes@travisperkins.co.uk
+44 (0) 7469 401819
Helen O'Keefe
Helen.okeefe@travisperkins.co.uk
+44 (0) 1604 685910
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
For the year ended 31 December 2018
The Group operates in markets and an industry which by their nature are subject to
a number of inherent risks. The Group is able to mitigate those risks by adopting
different strategies and by maintaining a strong system of internal control.
However, regardless of the approach that is taken, the Group must accept a certain
level of risk in order to generate suitable returns for shareholders and for that
reason the risk management process is closely aligned to the Group's strategy.
The Board has a risk reporting framework that ensures it has visibility of the
Group's key risks, the potential impacts on the Group and how and to what extent
those risks are mitigated. The Board has assessed its risk appetite, which is set
to balance opportunities for growth and business development in areas of
potentially higher risk and return, whilst maintaining its reputation, legal and
regulatory compliance and high levels of customer service and satisfaction. As part
of its risk management process, the principal risks stated in the Group's risk
register are reviewed, challenged and updated by the Board and monitored throughout
the year. Each operating business within the Group monitors a separate risk
register. These risk registers are used to determine strategies adopted by the
Group's various businesses to mitigate the identified risks and are embedded in
their operating plans.
Details of the Group's risk management processes are given in the Corporate
Governance report on page 59.
In common with most large organisations, the Group is subject to general commercial
risks: for example, political and economic developments, changes in the cost of
goods for resale, increased competition in its markets and the threat of emerging
and disruptive competitors, material failures in the supply chain, failure to
secure supply of goods for resale on competitive terms, cyber-security breaches and
failure of our IT infrastructure.
The risk environment in which the Group operates does not remain static. During the
year, the Directors have reviewed the Group's principal risks and have concluded
that as the nature of the business and the environment in which it operates remain
broadly the same, the principal risks it faces are largely unchanged. However,
following the announcement in December 2018 that the Group strategy is being
refined to achieve greater simplification and focus on serving trade customers
through advantaged businesses, activities are underway to reshape the portfolio
with the proposed divestment of the Plumbing & Heating businesses. As a result, the
Directors have concluded that acquisition and disposal activity, previously
combined with risks associated with business transformation projects, is a key area
of focus and heightened risk for the Group and it is now described separately. The
Directors have also extended the description of health and safety risk to consider
in more detail the transport related risk faced by the Group, due to the scale of
the fleet it operates and the associated regulatory and compliance requirements.
Finally, the reduction in the deficit for the Group's two main defined benefit
schemes, supported by the closure of the schemes to future accrual in 2018 and a
continued focus on liability management, means that the Board no longer believes
that this area represents a principal risk.
The nature of risk is that its scope and potential impact will change over time. As
such the list below should not be regarded as a comprehensive statement of all
potential risks and uncertainties that may manifest in the future. Additional risks
and uncertainties that are not presently known to the Directors or which are
currently deemed immaterial could also have an adverse effect on the Group's future
operating results, financial condition or prospects.
The table on pages 36 to 41 sets out, in no particular order, the current principal
risks that the Board considers to be material, their potential impacts, the factors
that mitigate them and those areas of the businesses' strategies they potentially
impact. The inherent risk (before the operation of control) is stated for each risk
area together with an indication of the current trend for that risk.
CHANGING CUSTOMER AND
COMPETITOR LANDSCAPE
INHERENT RISK RISK MITIGATION
RISK: HIGH DESCRIPTION
Changes to market practice are
The Group tracked on an ongoing basis and
sells and reported to the Board.
distributes
building
TREND: STATIC materials
through a The Group continues to build
number of multi-channel capabilities that
channels. The complement its existing operations
number of and provide its customers with the
outlets and opportunity to transact with the
channels where Group through channels that best
building suit their needs.
STRATEGY: materials can
be purchased
continues to
grow with new The Group's strategy allows it to
Best-in-class competitors use sites flexibly. Alternative
service entering the space utilisation models are
market. These possible, including maintaining
new entrants smaller stores and implanting
may operate additional services into existing
Focus on business branches.
trade models which
differ
significantly
from the The development of new, innovative
Advantaged traditional and competitive supply solutions is
businesses merchanting, a key strength of the Group. It
retail and works closely with customers and
online formats suppliers on a programme of
from which the continuous improvement designed to
Group operates improve its customer proposition.
and may take
market share.
IMPACT: Pricing strategies across the Group
are regularly reviewed and where
At the same necessary refined to ensure they
time, customer remain competitive.
Adverse purchasing
effect habits
continue to
evolve with
increasing
on financial online
results transactions.
Customers'
preference for
purchasing
Loss of materials
market share through a
range of
supply
channels and
not just
through the
Group's
traditional
competitors
may affect the
Group's
performance
and adversely
impact the
profitability
of
branch-based
operations.
Increasing
price
transparency
could lead to
a perception
that the Group
is less price
competitive
leading to
downward
pressure on
price and
margins.
COLLEAGUE RECRUITMENT, RETENTION AND
SUCCESSION PLANS DO NOT DELIVER THE
REQUIRED SKILLS AND EXPERIENCE
INHERENT RISK RISK MITIGATION
RISK: MEDIUM DESCRIPTION
The Group's employment policies and
The ability to practices are kept under regular
recruit, review.
develop,
retain and
TREND: STATIC motivate
suitably Staff engagement and turnover by job
qualified type is reported regularly to the
staff is an Executive Committee and to the
important Board. Succession plans are
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driver of the established for the most senior
Group's positions within the Group and these
overall are reviewed annually.
STRATEGY: performance.
The Group may
also be
exposed to The Group's reward and recognition
Best-in-class skills systems are actively managed to
service shortages in ensure high levels of employee
certain areas engagement.
which can
result in
Focus on salary cost
trade pressures. The Salaries and other benefits are
availability benchmarked regularly to ensure that
of suitably the Group remains competitive and
qualified the Group operates incentive
Simplifying commercial structures to ensure that high
the Group drivers is one performing colleagues are adequately
such area of rewarded and retained.
focus for the
Group, which
is critical to
the operation A wide range of training programmes
of its fleet are in place to encourage staff
to meet development, whilst management
IMPACT: customer development programmes are available
delivery to those identified for more senior
expectations. positions.
Inability to
develop and
execute The strength
development of the Group's
and customer
succession proposition is
plans underpinned by
the quality of
people working
throughout the
Adverse Group,
effect on particularly
delivery of in customer
strategy facing roles.
Many of them
have worked
for Travis
Competitive Perkins for
disadvantage some
considerable
time, during
which they
have gained
valuable
product and
customer
knowledge and
expertise.
The Group
faces
competition
for the best
people from
other
organisations.
Ensuring the
retention and
development of
employees and
that robust
succession
plans exist
for key
positions is
important for
the Group to
deliver on its
strategic
objectives.
SUPPLIER DEPENDENCY, RELATIONSHIP AND
DISINTERMEDIATION LEADING TO ADVERSE
IMPACTS ON RANGING AND PRICE
INHERENT RISK RISK MITIGATION
RISK: MEDIUM DESCRIPTION
Making decent returns is one of the
The Group is Group's cornerstones which requires
the largest it to treat both customers and
customer to a suppliers fairly. The commercial and
number of its financial teams have established
TREND: STATIC suppliers. In strong relationships with the
some cases, Group's key suppliers and work
those closely with them to ensure
suppliers are contracts that are beneficial to
large enough both parties and the continuity of
to cause quality materials.
significant
supply
STRATEGY: difficulties
to the Group To spread the risk where possible
if they are contracts exist with more than one
unable to meet supplier for key products.
Best-in-class their supply
service obligations
due to either
economic or The Group has made a significant
operational investment in its Far East
Focus on factors. infrastructure to support its direct
trade sourcing operation which allows the
development of own brand products,
thereby reducing the reliance on
Alternative branded suppliers. The Group has
Simplifying sourcing may also adopted a conservative hedging
the Group be available, policy to reduce its exposure to
but the currency fluctuations.
volumes
required and
Financial the time it
strength may take those Comprehensive checks are undertaken
suppliers to on the factories manufacturing
increase products and the quality and the
production suitability of those products before
could result they are shipped to the UK.
in significant
stock-outs for
some
IMPACT: considerable
time leading
to poor
customer
Adverse service.
effect on
financial
result
The Group has
increased the
sourcing of
Adverse products from
effect on overseas
reputation factories.
This has
increased the
Group's
exposure to
sourcing,
quality,
trading,
warranty and
currency
issues, which
again may lead
to an adverse
impact on
customer
service.
Manufacturers
of building
materials sold
by the Group
may also look
to sell their
products
directly to
end customers
in the future
diminishing
the role of
distributors
such as
merchanting
and retail
distribution
businesses.
UNSAFE PRACTICES RESULT IN HARM TO
COLLEAGUES, CUSTOMERS, SUPPLIERS OR
THE PUBLIC
INHERENT RISK RISK MITIGATION
RISK: MEDIUM DESCRIPTION
The Group continues to challenge its
Keeping the thinking and approach to improving
Group's its safety performance through its
colleagues, 'Stay Safe' brand.
customers,
TREND: STATIC suppliers and
the public
safe is a Governance of Stay Safe is
cornerstone of well-established and designed to
the business. promote a continual focus on health
The Group and safety. Stay Safe performance is
operates over reviewed at all Board meetings, by
2,000 sites, the Executive Committee and by the
STRATEGY: many with dedicated Stay Safe Committee, which
complex and is chaired by a Non-executive
busy yards. It Director.
also operates
Best-in-class one of the
service largest
vehicle fleets The Group's regular Divisional
in the UK, leadership meetings also focus on
distributing performance and continuous
Financial heavy and improvement in this area. These
strength bulky forums also monitor the achievement
materials. of transport-related compliance
Poorly requirements, including driver
implemented licencing and professional
safety competence.
practices on
site, on the
road or at
IMPACT: delivery Incidents are monitored,
locations investigated and corrective action
could result taken to reduce the likelihood of
in significant similar incidents in future. Stay
Harm to our harm to people Safe assurance reviews are regularly
colleagues, which would undertaken at sites by dedicated
customers and damage the safety professionals with any
the wider Group's resulting improvement actions
community reputation and tracked to completion.
could impact
trading
performance.
Potential De-risking the Group's operations,
legal action, improving health and safety
fines and awareness and implementing improved
penalties ways of working are at the forefront
of the Group's activities. Further
information on progress made during
2018 can be found in the Health and
Adverse Safety report on pages 47 to 49.
effect on
financial
results
Adverse
effect on
reputation
THE GROUP ALLOCATES CAPITAL INEFFICIENTLY OR
UNDER INVESTS IN ADVANTAGED BUSINESS AND DOES NOT
ACHIEVE DESIRED RETURNS
INHERENT RISK RISK MITIGATION
RISK: MEDIUM DESCRIPTION
Return on capital is one of the
The Group Group's key performance indicators
operates a as shown on page 19. The Group's
number of decision to refine its strategy and
different focus on trade customers in the most
TREND: STATIC businesses in advantaged businesses will impact
the UK which the allocation of capital with more
operate in focused management attention and
different but capital deployment in areas of
complementary higher return.
channels. As
the Group's
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