DJ Travis Perkins: Travis Perkins: Publication of 2019 Annual Report
Travis Perkins (TPK) Travis Perkins: Travis Perkins: Publication of 2019 Annual Report 03-March-2020 / 15:00 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 2019 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 2019. The Company's Annual Report 2019 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 2019; 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 Robin Miller Ribin.miller@travisperkins.co.uk +44 (0) 1604 592533 STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES For the year ended 31 December 2019 The Group's risk management activities continue to be developed to support management in identifying both threats and opportunities that could materially impact strategic delivery, performance, compliance and reputation. The Group operates in markets and an industry which, by their nature, are subject to a number of inherent risks. In common with most large organisations the Group is also subject to general commercial, political and economic risks. The Group is able to mitigate those risks by adopting different strategies and by maintaining a strong system of internal control which is routinely tested and assured. 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. Risk management framework The Board has developed 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. Further details of the Group's risk management processes and oversight are given in the Corporate Governance Report on page 75. The Board undertook an enhanced exercise during 2019 to consider the nature and level of risk it is prepared to accept to deliver the strategy. Risk appetite is set across a suite of risk categories directly relevant to the Group, supported by high-level risk statements which set out the expectations for the management and control of each category of risk. The resulting assessment of risk appetite has been set to balance opportunities for growth and business development in areas of potentially higher risk and return, whilst prioritising safety and maintaining the Group's reputation, legal and regulatory compliance and the desired high levels of customer service and satisfaction. Principal risks At least twice a year, the Board and Group Leadership Team formally assess the Group's principal risks. The table on pages 40 to 51 sets out, in no particular order, the principal risks that are currently considered by the Board to be material to the achievement of the Group's objectives, their potential impacts, mitigating factors and those areas of the businesses' strategies that are potentially impacted. The inherent risk (before the operation of mitigating controls) is stated for each risk area together with an indication of the current trend for that 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. Key changes in the year *********************** The risk environment in which the Group operates does not remain static. As part of the ongoing risk review process, the Board and Group Leadership Team: identify new risks for the Group, assess the inherent risk associated with each principal risk, and determine whether the risk trend facing the Group is increasing, decreasing or unchanged. Whilst the risk profile for the Group remains relatively stable relative to 2018, the following key changes were identified in 2019: - One additional principal risk has been disclosed in relation to IT systems and infrastructure. This risk previously formed part of the risk associated with change management and has been separated given the Group's plans to modernise its IT infrastructure and replace a number of legacy systems - The inherent risk associated with business transformation initiatives, including the IT modernisation programme, has been reassessed as "high" to reflect the scale of change activities ongoing or planned within the Group - The inherent risk associated with cyber threats and data security has been increased to "high" to acknowledge that the continual changes in both threat sources and the tactics employed by cyber criminals present an ongoing challenge for all companies, including the Group Emerging risks ************** The Board is required to undertake a robust assessment of the emerging risks that may impact the Group under the 2018 UK Corporate Code, which is effective from 1 January 2019. In response to this requirement, consideration of emerging risk has been integrated into the Group's current risk management practices, which continue to be developed and refined. The Board regularly considers the latest risk research alongside views on emerging risks collated from assessments made by the business unit and functional leadership teams. These risks are monitored but are not currently assessed as sufficiently material to be considered as principal risks. The Group is monitoring the potential impact of COVID-19 carefully. The Group will continue to review the possible impacts on the business and refine its contingency plans as more information about the epidemic emerges. Risk workshops are undertaken periodically with the most significant business units and are structured to consider a number of risk categories, including "disruption", being the risks that may emerge and impact the viability of a strategy or business model. The current statement of principal risks recognises the potential for such disruption in the competitor and customer landscape, as well as in relation to suppliers. Category Principal risks Risk trend Inherent risk External Changing customer High Medium High and competitor High landscape - Supplier risks - Brexit - Market conditions - Strategic Capital allocation Medium High - Change Management Medium - Portfolio management - Technological IT systems and - High High infrastructure - Cyber threat and data security Operational Health and safety Medium Talent management - Medium Medium Legal compliance - - Key disruptive risks are also identified and mitigated by the Group. None of them are currently considered to be principal risks Risk Trend: - Increasing - Decreasing - Unchanged CHANGING CUSTOMER AND COMPETITOR LANDSCAPE INHERENT RISK RISK MITIGATION RISK: High DESCRIPTION The Board is TREND: The Group cognisant of the Unchanged sells and risks and distributes opportunities building presented by the materials changing customer STRATEGY: through a and competitor number of landscape and channels. The evaluates number of developments both Best-in-class outlets and in terms of services channels where threats and building opportunities for materials can the Group.. One be purchased example of this in Focus on continues to 2019 is the trade grow with new decision to pursue competitors the demerger of entering the the Wickes market. These business, and for Advantaged new entrants the Group to focus businesses may operate on the service of business trade rather than models which retail customers. differ
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IMPACT: significantly from the traditional The Group merchanting, continues to build Adverse retail and multi-channel effect online formats capabilities that from which the complement its Group existing currently operations and on financial operates and enable customers results may take to transact with market share. the Group through channels that best suit their needs. Loss of market share The demerger of the Wickes business will The Group is able change the to use its sites risk profile flexibly to of the Group respond to in the coming changes. year, as Alternative space exposure to utilisation models the retail are possible, sector is including reduced. maintaining smaller stores and implanting additional Customer services into purchasing existing branches. habits also During 2019, continue to Toolstation opened evolve with an its first high increasing street store. percentage of transactions for the Group now The development of originating new, innovative online. and competitive Customers' supply solutions preference for is a key strength purchasing of the Group. It materials works closely with through a customers and range of suppliers on a supply programme of channels and continuous not just improvement to through the enhance the Group's customer traditional proposition. competitors may adversely impact the profitability Pricing strategies of across the Group branch-based are regularly operations and reviewed and the Group's refined as overall necessary to performance. ensure they remain competitive. Increasing price transparency could lead to a perception that the Group is less price competitive leading to downward pressure on price and margins. TALENT MANAGEMENT INHERENT RISK RISK MITIGATION RISK: Medium DESCRIPTION The Group's TREND: People are key employment Unchanged to the Group's policies and success. The practices are kept ability to under regular recruit, review. Staff develop, engagement and retain and turnover by job motivate type is reported suitably regularly to the STRATEGY: qualified and Group Leadership experienced Team and the staff is an Board. A important Group-wide talent Best-in-class driver of the and succession services Group's exercise was overall undertaken in 2019 performance. and reviewed by The Group may the Board. Focus on also be Succession plans trade exposed to are reviewed skills annually; the shortages in process was certain areas reviewed for 2020 Simplifying which can to ensure that the Group result in plans are in place salary cost for the Board, pressures. senior management This may be positions and IMPACT: compounded by other critical Brexit if roles and to significant promote the numbers of EU development of Adverse citizens diverse and effect on decide to inclusive delivery of leave the UK pipelines. strategy (see also page 47). In particular, the The Group's reward Competitive availability and recognition disadvantage of suitably systems are qualified actively managed commercial to ensure high drivers is an levels of employee area of engagement. ongoing focus Salaries and other for the Group, benefits are which is benchmarked critical to regularly to the operation ensure that the of its fleet Group remains to meet competitive and customer the Group operates delivery incentive expectations. structures to ensure that high-performing colleagues are The strength adequately of the Group's rewarded and customer retained. proposition is underpinned by the quality of people working A wide range of throughout the training Group, programmes are in particularly place to encourage in branch and staff development. other Management customer-facin development g roles. Many programmes are colleagues available to those have worked identified for for Travis more senior Perkins for positions. The many years, Group's "Learn and during which Earn" they have Apprenticeship gained Programme ("LEAP") valuable has been in place product and for a number of customer years and has a knowledge and track record of expertise. successful delivery of apprenticeships in both branch-based The Group and functional faces roles. competition for the best people from other organisations. Ensuring the retention and development of colleagues and that robust succession plans exist for key positions is important for the Group to ensure it has the right skills and experience to deliver on its strategic objectives. SUPPLIER RISKS INHERENT RISK RISK MITIGATION RISK: Medium DESCRIPTION Making decent TREND: The Group returns is one of Unchanged faces a number the Group's of supplier cornerstones which risks in requires it to relation to treat both STRATEGY: key customers and dependencies suppliers fairly. and The commercial and relationships, financial teams Best-in-class overseas have established services sourcing and strong disintermediat relationships with ion, all of the Group's key which could suppliers and work Focus on adversely closely with them trade impact upon to agree contracts ranging and that are price. beneficial to both parties and Simplifying facilitate the Group continuity of The Group is quality materials. the largest This interaction customer to a continues as the Financial number of its Wickes demerger is strength suppliers. In progressed and some cases, revised those contractual suppliers are arrangements are large enough put in place. to cause the Group significant IMPACT: difficulties Where possible, and disruption contracts exist if they are with more than one unable to meet supplier for key Adverse their supply products, to effect on obligations reduce the risks financial due to either of dependency on a result economic or sole supplier. operational factors. Alternative Adverse sourcing may The Group has made effect on be available, a significant reputation but the investment in its volumes Far East required and infrastructure to
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