DJ Travis Perkins: Publication of 2020 Annual Report
Travis Perkins (TPK)
Travis Perkins: Publication of 2020 Annual Report
02-March-2021 / 19:55 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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Publication of the Annual Report 2020
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 2020. The Company's Annual Report 2020 can be
viewed on the Company's website - https://www.travisperkinsplc.co.uk/investors/results-reports-and-presentations/year/
2021
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 https://data.fca.org.uk/#/nsm/
nationalstoragemechanism
- Annual Report and Accounts 2020;
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
Enquiries:
Matt Worster
Matt.worster@travisperkins.co.uk
+44 (0) 7990 088548
Robin Miller
Robin.miller@travisperkins.co.uk
+44 (0) 1604 592533
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
For the year ended 31 December 2020
In an exceptional year dominated by the global pandemic, we have demonstrated a clear understanding of the risks we
face and taken a proactive approach to risk management to identify and pursue opportunities, drive better decision
making and, most importantly, prioritise the safety and well-being of the Group's colleagues and customers.
The pandemic has required an ongoing and agile assessment of risks, challenges and issues, adjusting to the development
of Covid-19 in real time. The pandemic and its wider economic effects continue to bring uncertainty to our operations
and the delivery of our strategic objectives. Even with a mass vaccination programme, this uncertainty is likely to
persist.
Risk management framework
We operate in an industry and markets which, by their nature, are subject to a number of inherent risks. In common with
most large organisations we are also subject to general commercial, political and economic risks. We are able to
mitigate those risks by adopting different strategies and by maintaining a strong system of internal control which is
routinely tested and assured.
Our risk management framework has three pillars:
* Top down - activities at the Board and Group Leadership Team levels, focused on material risks to the strategy and
operations.
* Bottom up - activities across the Group that capture risk perspectives that are significant at a business unit,
programme or functional level.
* Emerging risk - new and emerging risks are considered through the regular risk activities above, the results of
assurance activities, and, at least twice a year, through a process that assesses our risk set against external
benchmarks.
The output from each pillar informs the process to determine our principal risks.
Responsibility and oversight
The Board has overall responsibility for risk management and internal controls, and for reviewing their effectiveness
at least annually. The Board is supported in its assessment by the work of the Audit Committee, which regularly
assesses the risk framework and the results of key assurance processes, including the work of Internal Audit, to
provide assurance to the Board that risk is being effectively managed throughout the Group. Further details on risk
management responsibilities and oversight are given in the Corporate Governance Report on page 79.
Risk appetite
The Board accepts that, in order to achieve its strategic objectives, and generate suitable returns for shareholders,
it must accept, and manage, a certain level of risk. It undertakes an exercise, at least annually, 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.
In addition to its annual review in September, earlier in the year the Board also assessed whether the level of change
prompted by Covid-19 might lead it to revise its risk appetite.
This review concluded that the Group's response to Covid-19 had not sought to take additional risk and that its risk
appetite in related risk categories was already, and remained, one of low risk.
Risk assessment and reporting
Our risk management processes aim to identify and assess risks before they impact on activities, position the
businesses and support functions to effectively manage those risks and leverage related opportunities.
The Board has developed a risk reporting framework that ensures it has visibility of key risks, the potential impacts
on the Group and how and to what extent those risks are mitigated.
Our risk management activities continue to be developed to support management's assessments of threats and
opportunities that could materially impact strategic delivery, performance, compliance and reputation. Whilst Covid-19
has dominated risk activities for much of 2020, there has also been a focus on developing and delivering the risk
assessments required by the newly developed minimum standards that underpin our 12 material ESG focus areas. This work
will continue into 2021. In addition, a plan has been developed to further embed risk assessment into key strategic and
performance reviews in 2021, bringing an increased and regular focus on risk and opportunity management at key decision
points.
Risk assurance
We operate a "three lines of defence" model to obtain assurance that major risks are adequately mitigated and
controlled, as set out below. Oversight is provided by the Group Leadership Team and the Audit and Stay Safe
Committees, which includes review of progress against agreed improvement actions. Regular updates on assurance
activities are provided to the Board.
Line of Source of assurance Nature of assurance
defence
Business operations
& operational
1st management Direct assurance - execution of policies and procedures, training completion,
management controls and monitoring, key performance indicators and self-assessments
Branches &
distribution centres
Central functions
Includes Safety, Management assurance - risk management programme, compliance and monitoring
2nd Fleet, Legal, activities, central governance processes (including the setting of policies,
Finance, IT procedures and training)
and HR
Independent reviews
Independent assurance - internal audit activities and third party audits and reviews
3rd Internal audit, that objectively assess the adequacy and effectiveness of governance, risk
management and controls and support continuous improvement
external audit and
other third parties
Principal risks
The Board and Group Leadership Team robustly assesses the Group's principal and emerging risks at least twice a year. During 2020 the Board has considered principal risks at four meetings, including detailed assessments of the impact of Covid-19 on the risk set. The principal risks that we consider to have a potentially material impact on the Group's operations and the achievement of its strategic objectives are set out below. They are ordered by risk category rather than relative size of risk. The inherent risk (before the operation of mitigating controls) is stated for each risk together with an indication of the current trend for that risk and strategic objectives that are potentially impacted. Further detail in respect of the potential impact of these risks and the mitigating actions taken are explored on the following pages. The scope and potential impact of risks will change over time. As such the risks set out 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 us, or which are currently deemed immaterial, could also have an adverse effect on the Group's future operating results, financial condition or prospects.
Risk category Principal risks Strategic Risk trend - Risk trend - Inherent risk
objective objective 2020 2019
- -
Market conditions
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DJ Travis Perkins: Publication of 2020 Annual Report -2-
Pandemic NEW ABC High
External AE N High
Changing customer & competitor ABC ABDE - High Medium
landscape -
Supplier risks -
-
- Medium
Portfolio management -
Strategic Change management BCDE ACDE ABCE - High
ESG NEW - High
N
IT systems and infrastructure AD - - High
Technological Cyber threat and data security AE High
- -
- -
People ABC
Operational AE Medium Medium
Health, safety & well-being Legal ABCDE - - Medium
compliance
- -
Key A. Best-in-class services B. Focus on trade C. Advantaged businesses D. Simplify the Group E. Financial strength
N New
- Increasing
- Decreasing
- Limited change year-on-year
Key disruptive risks that may impact the viability of a strategy or business model are also identified and managed. Whilst several principal risks, including market conditions, supplier risks and the changing customer and competitor landscape, include elements that are considered disruptive in nature, they are categorised above according to the primary driver of the risk.
Key changes in the year
The risk environment in which we operate does not remain static and the Board has made the following changes to the principal risk set in 2020:
* Covid-19 was identified as an emerging risk in the 2019 report and has been the dominant area of focus for our risk management activities throughout 2020. Pandemic risk, specifically in relation to Covid-19, is now recognised as a new principal risk due to the inherent uncertainty associated with it. A pandemic is one of the very few risks that could result in the complete shutdown of our operations. Covid-19 has the potential to amplify or accelerate the onset of certain of our other principal risks and this potential for risk interdependencies has been kept under review during 2020, alongside the additional mitigation measures implemented.
* Brexit risk assessment and contingency planning remained a focus in 2020. In preparation for the end of the transition period, to offset potential disruption to the flow of goods in the event of "no deal", the business units again built targeted contingency stocks in the categories deemed most at risk, to ensure stock remained available to customers. To date, there has been little Brexit-related impact to the flow of goods although Covid-19 related disruption at certain ports has impacted us in a limited way. The Board no longer considers Brexit to be a principal risk.
Management have prepared for, and will continue to implement, the required changes to customs procedures, product standards and the recruitment of EU citizens, which remain the more significant areas of Brexit impact for the Group. Where relevant, Brexit-related risks have been incorporated into our other principal risks, and the underlying "bottom up" risk management processes.
* ESG is an area of increasing importance, as we recognise our impact and potential influence on the environment, the construction industry and wider society. We are seeking to take a leading position on ESG matters, which both addresses our responsibilities and an increasing level of interest and expectations from our customers, investors and other stakeholders. Accordingly ESG matters have been added as a principal risk.
* The risks in relation to Portfolio Management and Capital Allocation have been combined.
* In relation to principal risks brought forward from 2019, the Board considers that the market conditions risk, supplier risks and the changing customer and competitor landscape risk are increasing. All other risk trends are unchanged.
Emerging risks
As part of the overall risk assessment process, and in line with the requirements of the UK Corporate Governance Code, we capture and monitor areas of uncertainty that do not currently present a significant risk but which have the potential to adversely impact the Group in the future. These emerging risks are identified from regular reviews of risk research and other publications, alongside perspectives on emerging risks collated from assessments made by the business unit and functional leadership teams and the results of assurance activities. The emerging risks considered by the Board during 2020 included sustainability and climate change matters, digital technologies and, as a result of the pandemic, the impacts of changes to working locations and ways of working.
Market conditions
Impact Risk description Risk mitigation
Our markets are highly fragmented and cyclical in
nature and performance is affected by general
economic conditions and a number of specific
drivers of construction, repairs, maintenance and
improvement and DIY activity. These include the Our businesses all hold #1 or #2 positions in their
volume of housing transactions, driven by chosen markets.
mortgage availability and affordability, house-
price inflation, the timing and nature of
government activity to stimulate activity, net
disposable income, consumer confidence, interest We maintain a comprehensive tracking system for lead
rates and unemployment levels. indicators that influence the market for the
consumption of building materials in the UK.
The fundamental long-term market drivers remain
robust despite Covid-19 related uncertainty in The Board conducts an annual review of strategy,
the short-term. Whilst a number of longer-term which includes an assessment of likely competitor
themes are beginning to impact the industry, activity, market forecasts and possible future
- Adverse these present us with both opportunities and trends in products, channels of distribution and
effect on risks in responding to the changes: customer behaviour.
financial
results - Traditional ways of working in the industry
- Loss of will change, driven by technology and an
market share increasing move to modern methods of Significant events that may affect the Group are
construction. monitored by the Group Leadership Team and reported
- There is a need to address a growing to the Board monthly by the Group CEO. Should market
productivity challenge in the construction conditions deteriorate then the Board has a range of
sector alongside an increasing scarcity of options dependent upon the severity of the change.
technical knowledge, which will hinder Historically these have included amending the
industry growth if unaddressed. Group's trading stance, cost reduction, changing the
- There is a drive for greater digitisation, focus or lowering capital investment and reducing
which has accelerated as a result of the the dividend.
pandemic.
- The ability to deliver and measure social
value will become fundamental to long-term
success. We have established a number of partnerships to
explore opportunities to work with companies
involved in modern methods of construction.
We must also manage the impacts of changing
building standards and the UK Government's future
framework for heat in buildings through the
products and services that we offer.
Pandemic
Impact Risk description Risk mitigation
The Covid-19 pandemic has significantly impacted
our operations and results in 2020. It is not
clear how long the pandemic will last, how much We acted quickly to respond to the challenges posed
more extensive it may yet become, what impact by Covid-19 with the safety and well-being of
further virus variants could have, how quickly colleagues and customers our overriding priority in
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