Travis Perkins’ results were marred by £111m of costs associated with its branch closure programme.
Revenue in the half declined by 20% to £2,781m because of the Covid-19 restrictions but damage to the bottom line was much greater.
As a direct result of the trading conditions, there were added costs in relation to holiday pay, slow moving stock, rebates, and timing of customer credit account settlement, although up to £20m of this might be recouped if the recovery in trading continues through the second half of the year.
During the April lockdown, Travis Perkins continued to trade but with a ‘service-light’ operating model, serving customers remotely. Around a third of merchanting branches were open, while Wickes and Toolstation relied on online sales to operate most stores as fulfilment centres for either direct delivery or click & collect.
It was soon apparent that surgery was required. On 15th June the board announced restructuring plans. Many stores never reopened. By August, 165 branches had been closed and 2,500 staff (9% of the total) let go.
For the six months to 30th June 2020, Travis Perkins made an adjusted operating profit of £42m (H1 2019: £220m). Taking into account £129m of adjusting items (mainly resulting from the restructuring actions announced in June), the actual operating loss was £92m (H1 2019: operating profit of £62m).
The restructuring is expected to deliver operating cost savings of £120m a year in the future.
An adjusting item of £111m has been recognised in half-year accounts to cover the initial cost of the restructure.
Chief executive Nick Roberts said: “Throughout the pandemic, the health and safety of our colleagues and customers has been our primary concern. Customer interactions have changed significantly resulting in changes to the way we do business, from increased activity through digital channels through to alterations to our physical store formats in order to maintain safe working practices.
“Although our financial performance in the first half of 2020 was impacted by the Covid-19 pandemic, and we have had to undertake a restructuring programme in light of the challenging outlook for the group’s end markets, we have made significant strategic and operational progress against the four strategic priorities we outlined at our full year results in March 2020.
“Although considerable uncertainty around the impact of the Covid-19 pandemic remains, the actions we have taken to adapt and innovate in our businesses mean that the group is well placed to continue to service our customers, support our colleagues, outperform our markets and generate value for our shareholders.”