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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