Target to ensure continuous above ‘market’ sales growth with strong gross and net margin contribution. At Profit Centre level, we review sales and gross profit on a daily basis, comparing performance against prior year and plan. Each business has additional reporting available from local systems detailing overall sales and gross margin performance on a summarised customer and product group basis, with further detail available at individual product level. The Group also measures organic sales growth on a quarterly basis and compares this to market information produced by our industry trade associations. Whilst there are some differences in the composition of the index to our own business, this does give us a guide as to how we are performing against the sector.
A key component in our strategy is to develop our e-business capabilities which are referred to in both the Chair’s Statement and the CEO’s Year in Review sections of this Report.
KPIs are measured to cover service levels including stock availability. However, the Group has developed a number of additional measures to be able to compare efficiency levels accurately between Business Units, and these will include such KPIs as overall cost per pick, cost per delivery (both in overall quantum and as percentage of sales) and number of suppliers for both stock and expense supplies, with an overall view to support the various cost improvement initiatives being undertaken.
In 2020 and 2021, our ability to make substantial improvements has been made difficult with firstly dealing with the immediate fallout from the 2020 lockdown, and more latterly substantial disruption in supply chains. In 2022 we believe that markets will continue to normalise, and we can then return to a clear focus on productivity improvement.
Group Cost per Pick (2019)*
Group Cost per Pick (2020)*
*Being the Group’s total cost of warehousing, including property and people, divided by number of invoiced lines in the year.
A continued focus on reducing gearing in the balance sheet, and the creation of excess cash positions, will protect the business from any macroeconomic uncertainties.
This proved beneficial in the pandemic period when working capital reduction allowed Net Debt to be managed down, and now that volumes have increased, we are using the capacity created to invest in an enhanced inventory profile.
A continued focus on controlling credit risk and, where possible, putting in place more favourable terms.
*Bank Debt less cash and cash equivalents
**Includes £0.9m HMRC COVID-19 related support
Turn & Earn Index is calculated by multiplying gross margin by stock turn. In 2021, the gross margin (achieved was 35.33% and the average stock turn achieved was 2.37, therefore the Turn & Earn index was 84%.
Cost-effective, secure IT environments that provide long-term stability for the Group’s activities remains a key part of the Group’s strategy.
The Board believes that a reduction in the number of IT systems that operate within the Group is a key element in improving overall efficiency and control and reducing risk. The long-term objective is to have a single integrated process and accounting system. However, in the medium term, the focus will be on reducing the number of process systems to four or less, and with a single accounting system for aggregating financial performance summaries, sales credit management and supplier payment processing.
*Increase due to acquisition activity.
Investing in our management teams and staff brings the benefits of improved retention and talent identification for succession planning. We see training and development of employees as key to our long-term success.
To improve leadership skills at management levels all senior staff will undertake training at Leadership Trust.
The Group conducts an annual Employee Engagement Survey to measure employee satisfaction, and subsequent activities are tailored to improve overall engagement.
Employee Engagement (2019)
Employee Engagement (2020)
*2019 figure reported in 2019 Report & Accounts at 66% but restated to calculate on a weighted average basis and thereby provide a like for like comparison.