The latest trading update from Travis Perkins plc discusses the operational changes it has made in response to the impact of the coronavirus outbreak.
On the day of the company’s (largely virtual) AGM, Nick Roberts, Chief Executive, commented: “In light of the COVID-19 emergency, we have established a new operating model that has kept colleagues and customers safe, operating within Government guidelines, and enabling branches across all of the Group’s businesses to remain open. Moreover, we have provided essential services and support to keep the nation’s critical infrastructure maintained and operational and the UK’s homes warm, dry and safe during this time of need.
“We continue to adapt our operations, applying stringent social distancing and using technology to enable contactless operations, and we are therefore able to respond to the Government’s call to ensure that the construction industry can continue to deliver on crucial programmes and projects and be an engine for future economic recovery.
“As we move forward we will continue to adjust our operations, with our foremost priority to keep colleagues and customers safe and the industry supplied with the materials it needs.”
Business operations and trading
An accompanying statement from the company outlined the impact of the coronavirus outbreak and the implementation of the subsequent restrictions. In noted that, since late March, the Group has been running a “service-light” operating model, focusing on serving customers through remote, non-contact channels.
Throughout the early weeks of the lockdown, around a third of TP’s total Merchanting branches and around half of all Plumbing and Heating branches were operating. These sites have been primarily running call and collect or direct delivery services to support essential construction programmes. These include the construction of key NHS assets including the Nightingale hospital network, the ongoing maintenance of national infrastructure and support for the essential repair and maintenance of domestic homes.
Wickes and Toolstation have been operating across the vast majority of their branch networks, with branches acting as fulfilment centres for transactions completed via digital channels for either direct delivery, or with essential items being available for collection within a designated time slot. The Wickes Kitchen & Bathroom design and installation service, usually contributing around a third of Wickes sales, remains closed.
In the first three weeks of April, operating through the service-light model, Group total revenue was approximately one-third of the same period in 2019 on a comparable basis.
In recent weeks, the Group reports that it has been working closely with customers, suppliers, trade bodies and the UK Government to develop safe-working protocols which can be applied across the construction supply chain to enable more activity to be carried out safely under lockdown.
Since 20 April, the Group has been “carefully opening” more of its Merchant branch network, with branches continuing to operate the service-light, non-contact operating model. This, it notes, will give greater support to large construction firms and subcontractors as they restart construction sites, and give smaller, local trade customers improved access to products. Revenue performance in Wickes and Toolstation is said to have continued to improve with the businesses responding “at pace to the changing nature of the trading environment, reconfiguring to significantly increase the capability of distribution networks to cope with the high levels of consumer demand”.
Cost base mitigations
Actions have been taken to “reduce and carefully manage the operating cost base of the Group”, with all businesses taking decisive actions to eliminate discretionary spend. In addition, the Group has accessed the Government support schemes which have been put in place. The closure of branches, particularly across the Merchanting businesses, has led to the furlough of both front line branch teams and colleagues in support functions.
The statement noted: “Altogether around half of the Group’s 30,000 colleagues were furloughed for the first three weeks of the lockdown. Colleagues have been furloughed on full pay, with leadership teams and remaining colleagues working hard to sustain high levels of communication to maintain team cohesion and morale.”
In addition, a decision was taken and announced internally on 7 April 2020 by the Board of Directors and the Group Leadership Team to voluntarily reduce their salaries by 20% effective from 1 May for a period of three months.
The Group is benefitting from the business rates holiday, a saving of around £90m for the Group on an annualised basis.
Outlook
The statement said: “The Group has adapted its business operations at pace, working with industry and Government to design and implement safe ways of working and accelerating the use of technology for improved customer convenience, and greater flexibility and simplicity. These actions have positioned the Group well to support customers across the wider construction industry as a critical economic engine for growth.
“Whilst the uncertainty continues with respect to both the duration of the lockdown period and the eventual shape of the UK economic recovery, the Group remains focused on near-term actions to maintain the safety and welfare of its colleagues, customers and suppliers, and to promote safe practices which can enable more construction work to recommence.”
For the full statement, please visit the Travis Perkins plc website
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