Walker Greenbank’s FY20 results date has been reset to 30 June (and complies with updated FCA policy guidance). Its latest update provides no new financial information though orders continue to be received despite lockdown conditions. Operational steps already taken appear to be appropriate, retaining sufficient infrastructure to service prevailing sales demand levels while additional actions aimed at preserving business liquidity are referenced, consistent with those seen elsewhere in the quoted sector. Taken together, the company appears to have quickly adjusted its business model to meet current market challenges in FY21.
Walker Greenbank’s scaled down operations continue to trade, albeit at well below normal intake levels; lockdown home renovation activity is a possible source of near-term demand here. Current staffing is at c 15% of normal levels, the remainder – including most of the c 40 overseas employees – are in furlough arrangements. The company appears to have adjusted quickly to the current position, including temporary factory and showroom closures, with relatively modest organisational change since the last update three weeks ago, soon after the UK lockdown began.
If sales run rates do not deteriorate further, at some point Walker Greenbank’s previously noted healthy finished goods inventory positions could reach levels that would otherwise support decisions to restart factories. The bigger picture of course is when and to what extent COVID-19 restrictions are lifted to allow normal trading activity to resume. The ideal scenario is for these aspects to coincide though we are not currently in a position to appraise the likelihood of this occurring.
No further net debt update was provided. The announcement of temporary salary reductions across the board is a further step to aid cash preservation. Given that the business platform has been reset at appropriate levels, we interpret this to mean that cash flows have been within expected management parameters since the last update about three weeks ago (on 25 March). If anything, the sales performance has probably been a relatively pleasant surprise though we note that the company has also added a temporary £2.5m overdraft facility (to an existing committed £12.5m RCF and uncommitted £5m accordion) as additional liquidity cover, with an inference that it has yet to be used.
While it is unrealistic to expect significant strategic change by the new management team to be effected in the current trading environment, we sense that the opportunity to review and improve the business model is not being wasted in these ultimate stress test market conditions.
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