Travis Perkins (TPK)
Travis Perkins: Trading and liquidity update and business restructuring
15-Jun-2020 / 09:00 GMT/BST
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15 June 2020
Travis Perkins plc - Trading and liquidity update and business restructuring
Current trading
Over the last six weeks, the Group has continued to open more of its
branches under the safe, social-distancing working practices we have
developed in conjunction with customers, suppliers and construction industry
bodies, as well as the UK Government.
Group volumes in May were around 60% of prior year with an improving trend
throughout the month. The Group's weekly volume run rate is now around
85-90% of prior year with particular strength in Wickes' core DIY ranges and
in Toolstation, with both businesses demonstrating improving like-for-like
growth versus 2019, with performance underpinned by their strong digital
capabilities.
Across the Merchanting and Plumbing & Heating businesses, volumes are now
around 80% of prior year with more marked differences between the businesses
depending on the customer category mix and also with some regional
variations. The General Merchanting business is operating well, whereas
trading in Plumbing & Heating is recovering more slowly as a greater
proportion of plumbing work requires tradesmen to work in people's homes.
However, while there has been a significant recovery in trading volumes in
recent weeks, it is evident that the UK is facing a recession and this will
have a corresponding impact on the demand for building materials during 2020
and 2021.
Business restructuring
Throughout the COVID-19 crisis, the safety of colleagues and customers has
been of paramount importance, with the closure, re-opening and operation of
branches focused on maintaining a safe approach to trading. The Group has
used Government schemes appropriately to protect employment during the
lockdown period, giving time to make an initial assessment of the level of
recovery of the trading environment as the lockdown eases.
Reflecting the challenging outlook for our end-markets, the Group is taking
regrettable but necessary actions to preserve the future competitiveness of
the business.
Following discussions with colleagues this morning, the Group has commenced
a consultation process regarding the closure of around 165 branches across
the overall branch estate, representing approximately 8% of the Group's
network. In addition, the Group is consulting on above-branch roles in the
distribution, administrative and sales functions. In total, the Group
expects to reduce the number of colleagues by around 2,500 or approximately
9% of the workforce.
Branch closures will be concentrated in the Merchant businesses, in
particular the Travis Perkins General Merchant, focusing on small branches
where it is either difficult to implement safe distancing practices, or
where marginal profitability will be eroded in a reduced volume environment.
Strong cash management to maintain a robust financial position
The Group continues to maintain a strong liquidity headroom position with a
robust balance sheet. Actions to reduce the monthly operational cash burn
rate and to carefully manage working capital have continued. Customer
collections remain robust, enabling the Group to maintain its committed
payments to suppliers throughout the crisis period, whilst also preserving a
strong liquidity position. At 12 June, the Group had cash deposits of GBP363m,
and taken together with the undrawn GBP400m Revolving Credit Facility, overall
liquidity headroom of GBP763m.
The Group continues to work closely with its relationship banking syndicate.
Despite the strong liquidity position, given the impact of the COVID-19
crisis and the resulting lockdown period on the Group's income statement for
2020, the Group has taken the prudent step to agree a relaxation of the
covenants[1] for the test dates at the end of June and December 2020.
· The interest cover covenant has been waived for both June and December
2020
· The net leverage covenant has been relaxed to 3.5x for June 2020
· The net leverage covenant has been waived for December 2020
· A minimum liquidity headroom covenant[2] has been established for
September and December 2020
Interim results announcement
Due to the ongoing uncertainty caused by the COVID-19 pandemic, the Group
has decided to publish its interim results in early September.
Nick Roberts, Chief Executive, commented:
"The COVID pandemic has created significant challenges across our Group and
I have been hugely encouraged by the flexibility of our colleagues to adapt
our business models successfully and at pace, which has enabled us to
maintain safe working practices whilst continuing to provide an effective
service to our customers.
Whilst we have experienced improving trends more recently, we do not expect
a return to pre-COVID trading conditions for some time and consequently we
have had to take the very difficult decision to begin consultations on the
closure of selected branches and to reduce our workforce to ensure we can
protect the Group as a whole. This is in no way a reflection on those
employees impacted and we will do everything we can to support them during
this process.
The Group has a robust balance sheet, strong liquidity position and I am
confident that these proposed changes will enable us to trade successfully
through this period of uncertainty with a cost base that better reflects the
environment we are operating in."
Enquiries:
Travis Perkins Powerscourt
Graeme Barnes Justin Griffiths / James White
+44 (0) 7469 401819 +44 (0) 207 2501446
graeme.barnes@travisperkins.co.uk travisperkins@powerscourt-group.com
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[1] Existing covenant tests on the Group's GBP400m RCF: net leverage of 3.0x;
interest cover of 3.5x. Covenants are tested biannually at 30 June and 31
December.
[2] Minimum liquidity headroom set at GBP100m excluding any additional
facilities
ISIN: GB0007739609
Category Code: TST
TIDM: TPK
LEI Code: 2138001I27OUBAF22K83
Sequence No.: 69660
EQS News ID: 1069531
End of Announcement EQS News Service
(END) Dow Jones Newswires
June 15, 2020 04:00 ET (08:00 GMT)
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