Travis Perkins plc (LON:TPK) said today it’s trading performance in 2020 has been in line with expectations, with solid trading in the Merchanting businesses and a strong start in Toolstation and Wickes. Total Group sales grew by 2.4% year-to-date, and recent trading has not yet shown a significant sales impact as a result of COVID-19.
However, due to the rapidly evolving situation and the dynamic UK Government response to the impact of COVID-19, the Group expects the trading environment to change quickly and materially in the coming weeks. In response to this, the Board is taking prudent decisions in order to successfully navigate this period of turmoil. These include the suspension of the proposed full-year 2019 dividend and the pausing of the Wickes demerger process in light of current extreme stock market volatility.
Robust financial position
The Travis Perkins Group enters the expected coming period of volatility in a strong position and with a robust balance sheet.
The Group has significant liquidity headroom; at 19 March 2020 the Group held £185m of cash on deposit, in addition to an undrawn revolving credit facility (RCF) of £400m. The Group maintains a close relationship with its core lending syndicate. Overall, the Group’s debt maturities are well spread with no immediate refinancing required.
Taking into account the current level of uncertainty, and the possibility of considerable disruption to the economy, the construction and RMI markets and to the Group’s business, the Board has taken the prudent decision to suspend the final dividend payment of 33.0p per ordinary share that was proposed with the announcement of the full-year 2019 results on 3 March 2020.
Should the Group experience a reduction in sales volume, either from enforced store closures or a wider reduction in economic and market activity, plans are in place to balance the protection of profitability and preservation of operating cash flow with the long-term needs of the business. Actions include reducing operating costs where sensible to do so, a robust assessment of all capital expenditure requirements, and careful management of inventory and other working capital. The Group will make use of tax relief and other Government measures as they become available.
Good progress has been made in recent months to prepare for the separation of Wickes. However, given the current level of uncertainty surrounding the impact of COVID-19 on the Group’s end markets, as well as the extreme volatility in global and UK equity markets, the Board has concluded that it would be prudent to pause the Wickes demerger process so that the Board and our colleagues can focus on managing the Group through the current challenges.
Whilst it is impossible to know exactly when it will be appropriate to re-start the demerger process, the intent to demerge remains unchanged, and we believe that we are in an advanced state of preparedness and would hope to be able to move forward swiftly when it is appropriate to do so.
The current level of uncertainty means it is too early for the Group to provide an accurate assessment on trading and the Group withdraws all market guidance in the near-term. The Group will provide further updates when there is greater clarity on the impact of COVID-19 on the trading environment.
Nick Roberts, Travis Perkins CEO, commented:
“Our highest priority is the health and safety of our colleagues, customers, suppliers and all other stakeholders, and we have taken decisive action to mitigate the risks we are facing as a business, and implementing contingency plans across the Group. We are absolutely committed to fulfilling the essential role we play in the UK construction industry supply chain in keeping the UK dry, warm, maintained and operational; providing materials, working capital funding and support for our trade customers, large and small.
“Whilst there is unprecedented uncertainty on how the virus outbreak will directly impact our markets and our businesses, we enter this period from a position of strength and security, with a strong balance sheet and access to significant committed liquidity.”