REG-Travis Perkins Travis Perkins: Trading and liquidity update and business restructuring

Travis PerkinsAnnouncement

15/06/2020 09:00

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   Travis Perkins (TPK)
   Travis Perkins: Trading and liquidity update and business restructuring

   15-Jun-2020 / 09:00 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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   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
   £363m,  and  taken  together  with  the  undrawn  £400m  Revolving  Credit
   Facility, overall liquidity headroom of £763m.

    

   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  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  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
    3 graeme.barnes@travisperkins.co.uk   travisperkins@powerscourt-group.com
                                           

    

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    4  1  Existing covenant tests on the Group's £400m RCF: net leverage of
   3.0x; interest cover of 3.5x. Covenants are tested biannually at 30 June
   and 31 December.

    5  2  Minimum liquidity headroom set at £100m excluding any additional
   facilities

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   ISIN:          GB0007739609
   Category Code: TST
   TIDM:          TPK
   LEI Code:      2138001I27OUBAF22K83
   Sequence No.:  69660
   EQS News ID:   1069531


    
   End of Announcement EQS News Service

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