15th Jun 2020 12:09
(Alliance News) - Travis Perkins PLC on Monday announced plans to close around 165 branches and cut 2,500 jobs, as the recession triggered by Covid-19 is expected to hurt demand for building materials.
The Northampton-headquartered builders' merchants has begun a consultations process to shut the 165 branches, around 8% of its network, and cut about 2,500 jobs, or 9% of its total workforce.
Travis Perkins explained that it has continued to reopen branches in line with government guidance. Its volumes in May were around 60% of what they had been in the same month of 2019, although "with an improving trend throughout the month".
At present, the firm's weekly volume run rate is at around 85% to 90% of the prior year, with its Wickes core DIY ranges and Toolstation showing the most strength and "improving like-for-like growth versus 2019" thanks to "strong digital capabilities".
Its Merchanting and Plumbing & Heating businesses are seeing volumes at around 80% of the year before, General Merchanting "is operating well". Conversely, Plumbing & Heating has has a more slow recovery since a larger proportion of plumbing work needs tradesmen to enter people's homes.
"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," Travis Perkins warned.
Right now, Travis Perkins is maintaining a strong balance sheet and liquidity headroom position. It has continued to take actions to cut its monthly operational cash burn rate and manage is working capital. So far, customer collections have remained robust to the company has been able to maintain committed payments to suppliers during the pandemic and preserve liquidity.
As of Friday last week, Travis Perkins had cash deposits totalling GBP363 million. When combined with the undrawn GBP400 million revolving credit facility, its overall liquidity headroom amounts to GBP763 million.
The company has successfully agreed relaxation of its covenants for test dates at the end of June and December 2020. This includes waiver of the interest cover covenants for both months, relaxation of the net leverage covenant to 3.5 times for June, and waiver of the net leverage covenant for December. A minimum liquidity headroom covenant is now in place for September and December of 2020.
In light of Covid-19 uncertainty, Travis Perkins is to publish its interim results in early September, having published its 2019 interim results in July of that year.
Chief Executive Nick Roberts said: "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."
Shares in Travis Perkins were down 1.9% at 1,059.00 pence in London.
By Anna Farley; [email protected]
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