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.
Clearly COVID-19 has impacted our ability to achieve sales growth in 2020. A key component of our recent strategy review was to develop our thinking and to commit to the necessary associated improvement in our e-business capabilities which are referred to in both the Chairman’s Statement and the CEO’s Year in Review sections of this report.
After an extended period of growth driven primarily by acquisition, we look to use our wider resources to both improve purchasing terms with our major supplier partners, as well as improve our operational efficiency.
At individual Profit Centre level, various KPIs are measured to cover service levels including stock availability. However, the Group is developing a number of additional measures to be able to compare efficiency levels accurately between Profit Centres, 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.
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.
( † ) Net debt excludes lease liabilities under IFRS 16.
Turn & Earn Index is calculated by multiplying gross margin by stock turn. In 2020, the gross margin achieved was 34.3% and the average stock turn achieved was 2.37, therefore the Turn & Earn index was 81.
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.
In order to improve leadership skills at management levels from Profit Centre and above, all senior staff will undertake training at Leadership Trust. This process was deferred in 2020 due to COVID-19, but will resume when lockdown restrictions are lifted.
In October 2018, the Group introduced an Employee Engagement Programme operated by Thomas International to measure and strengthen employee satisfaction. Following this, the Group has introduced various activities tailored to each business unit with a view to improve overall employee 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.