Travis Perkins PLC

LSE:TPK

Earnings Call Transcript 2018-Q1

[Operator]

Ladies and gentlemen, welcome to Travis Perkins' Q1 Trading Update. My name is Sasha, and I'll be coordinating your call today. [Operator Instructions]I will now hand you over to your host, John Carter, CEO; and Alan Williams, CFO, to begin. Please go ahead.

[John P. Carter, CEO & Executive Director]

Good morning all, and as said, welcome to our Q1 2018 trading update. I'm just going to give a short introduction and lift a couple of the extracts from the trading update today, and then we'll open things up for questions and answers. A solid start to 2018, with like-for-like sales growth up 3% and against total sales growth in the period of 2.4%. Clearly, this was a period that's been difficult and due to weather conditions experienced in the late February and March, and not helped by the fragile U.K. consumer environment. Underlying trading in General Merchanting and Contracts remains resilient despite the weather impacts. You'll see an extremely strong trading performance from Tony and the Plumbing & Heating division with like-for-like sales up 19.7%, where trading within DIY remains challenging. Wickes have continued to outperform its peers.In overall terms, volumes have been broadly flat, as you can see from the numbers and as we expected. And we've made good progress in recovering the commodity-led inflation. Our overall expectations for 2018 remain unchanged, and we'll mitigate the difficult early market conditions that we experienced earlier in the year.So if we open the things up for questions, thanks very much.

[Operator]

[Operator Instructions] The first question we have comes from Yves Bromehead from Exane.

[Yves Brian Felix Bromehead, Analyst of Building Materials]

Three questions, if I may. The first one is on the 20% -- well, 19.7% like-for-like growth in P&H. Could you maybe quantify how much of that was driven by the winter weather condition and how much is underlying? And could you also maybe give us a sense of the split between volumes and prices in this division, please? That would be my first question.

[John P. Carter, CEO & Executive Director]

It would be very difficult to interpret. I mean, clearly, the weather negatively impacts the building materials, and the delivered sales impacted the impacted TP. Wickes and Contracts, within some respects, benefit P&H. But they still had group challenges in delivering during that period, so it's very difficult for us to break that down.

[Alan R. Williams, CFO & Executive Director]

So Yves, it's Alan. I'd say there's a modest tailwind, particularly in the heating part of Plumbing & Heating overall. But it's the strong outperformance have a lot to do with the work that we, with Tony and the team, have been doing over the last 12 months in reorganizing the business. And we're not naïve to say it's not been helped by competitive actions, where competitors in the market have also been restructuring. That's given us a further tailwind. We tend to segment the Plumbing & Heating business into 3 areas when we think about it: the branch-based business, the wholesale business and then also the smaller online businesses that we have. We've seen strong growth in all 3 of those areas. The strongest growth overall was in the wholesale part, which is driven by heating and boilers. But we've been really encouraged by the performance across all 3 elements.

[Yves Brian Felix Bromehead, Analyst of Building Materials]

And I know it's too early in the year, but could you give us maybe a sense of what could be the run rate in the Plumbing & Heating division in the following quarters because 20% does look quite strong, let's say, [ and then it gets ] harder?

[Alan R. Williams, CFO & Executive Director]

So I think it's also instructive to look at the 2-year like-for-like sales. So Q1 '17 was a softer quarter for the business. I don't think we anticipate that we'll be doing 20% like-for-like for the rest of the year. But we do anticipate continuing good performance from the Plumbing & Heating businesses.

[John P. Carter, CEO & Executive Director]

I might be stating the obvious, but obviously, January through to March is a heating season, so you would see positive upturn. And the weather, obviously, influenced that period. So it's very difficult to predict, but we are making good -- Tony and the team are making good progress.

[Alan R. Williams, CFO & Executive Director]

Yes. And Yves, on your -- on the part of the question around the volume price split, we don't want to go into details. But the trend is not that different from the overall group trend that we've pointed to within the statement.

[Yves Brian Felix Bromehead, Analyst of Building Materials]

Okay. My last question would be on the Consumer business and more specifically on the Kitchen & Bathroom. You mentioned that your orders have recovered versus Q4 where you had a bit of -- some issues in that specific division. Could you maybe tell us if you expect any improvement in Q2 and Q3 because you mentioned that you were flat in Q1?

[Alan R. Williams, CFO & Executive Director]

So I mean, we -- this is, Yves, this is a call about the Q1. I appreciate people are looking for forward guidance. We've been encouraged by the recovery we've seen within K&B orders, given the position we are in during Q4. I have no reason to think that the trends will be dissimilar at this stage from what we've seen during the first quarter.

[Operator]

The next question we have comes from Emily Biddulph of JPMorgan.

[Emily Louise Biddulph, Research Analyst]

I've got 2 questions, please. The first one is just on Wickes. I mean, it looks like in the Consumer division is presumably, Toolstation is relatively similar in terms of growth. And if Kitchen & Bathroom has recovered, it looks like Wickes is incrementally a bit worse. Is that just weather? Or actually, do you think the DIY market is actually worse than it was in Q4? And then secondly, just on Plumbing & Heating, I realize it's a bit early to be talking about sort of margins and profitability. But in terms of the mix of growth that we're seeing, should we sort of not get too carried away on the margin outlook if we kind of plug in this sort of stronger growth into the rest of the year?

[John P. Carter, CEO & Executive Director]

Yes. So on the latter, I would absolutely concur, Emily, don't get too carried away. We are seeing good, good growth and good progress. But it is our lowest-returning division. And we are making good progress, obviously, as Alan called out with the wholesale business, which is quite high percentage of boilers. So good progress. But as you say, let's just keep it realistic.

[Alan R. Williams, CFO & Executive Director]

So Emily, on Wickes, I think we've said in the statement that we -- our view is that the U.K. DIY market is currently in decline. When we look across the different product categories, quite clearly, outdoor projects have been disproportionately hit given the weather. So I think you had an already weak DIY environment, a difficult competitive environment, a fragile consumer, and then we have the weather impacts on top. When you look across the -- some of the indoor categories, they have performed relatively better within the core within Wickes. I think relative to the competition, we're still confident with where we sit, but quite clearly, a difficult DIY sheds market. On the point you asked around Toolstation, Emily, we continued good performance in Toolstation. But even Toolstation took some impact during March, where we had to close the Bridgwater distribution center because -- and couldn't get trucks in and out, as well as some of the individual stores struggling to serve customers when there was low footfall in any case because of the weather. I think we don't want to spend the whole call talking about whether we can't avoid the factor, but it's just one of those things.

[Operator]

The next question we have is Robert Eason of Goodbody.

[Robert Eason, Head of Research]

Two questions, and I know you don't want to go into all the detail on margins in the first quarter. So directionally, can you just give us a feel how gross margins are progressing in General Merchanting and Contracts? And my second question is, like peppered through the statement, is just control over costs is very much to the fore. Can you just elaborate on what are you doing there to control costs? And what should we have on our heads in terms of underlying cost inflation in terms of operating costs?

[Alan R. Williams, CFO & Executive Director]

Yes. So on the first question, Robert, on General Merchanting and contract merchanting, gross margins, we're relatively comfortable with where we are. I think there's a line in particular in reference to General Merchanting where we said good recovery is cost price inflation. I think you can take some comfort and confidence from that. The Contracts division has continued to perform well overall. I know the like-for-likes come off considerably. I would point to 2 aspects on that. One, we've got a very strong comparator, where we had over 11% growth in the first quarter of '17. The second factor I'd point to is where is CCF and BSS would have been hit by, for a couple of days, the closure of branches brought by the weather. Keyline has had a disproportionate impact, given the wet and frozen ground conditions that we saw in the first quarter. So I think some of the house builders have referred to the impact that we've seen. We've also seen the impact in housing starts now as well. So with where we are at a relatively early stage in the year, we're comfortable on the gross margins on the Merchanting businesses. In terms of the ongoing cost activity, this is thousands and thousands of actions every single day across the branch network, in the stores, in retail and also in all of the office sites, the administrative side of the business. In terms of underlying cost inflation that we're seeing, clearly, the principal impacts are on wage inflation. There's a bit of impact from depreciation from some of the investments that we've made in prior years. And also, the annualization of the heavyside range sensor extension to the whole of England and Wales that we did in Q3. So we're working hard on actions across the piece to mitigate those impacts.

[Robert Eason, Head of Research]

Okay. And if you wouldn't mind if I just have one follow-up question. I can't remember what year it was, but there was 1 year when we had a similarly difficult kind of start to the year. And for people to make up the volumes from a rebate perspective, the market got very price competitive. What are the risks of that happening again as people just try to get the volumes back in the door after a very difficult Q1? Or are you seeing any signs of that?

[John P. Carter, CEO & Executive Director]

No. The honest answer, Robert, is it is too early in the year because the good news about the weather hitting us when it did, we got the best part of the year to recover. And I think if there's any -- going to be any concern, it's going to come into the back end of Q3 to Q4.

[Operator]

The next question we have comes from Paul Checketts of Barclays.

[Paul Daniel Alasdair Checketts, Director]

I've got 2. The first, on Plumbing & Heating, I know we should have covered the ground to a degree, but the number, the like-for-like growth numbers, it's remarkable. And even if you assume benefit from weather and BCG, it's still very high. Can you just recap on the steps that have been taken and where you think that really has gained traction, please? That would be helpful. And then the second is on the trade side, I think, John, when you spoke at the full year results, you mentioned that getting through some of the pricing might be more challenging because the independents would be a little slower to do so. Is that -- are you seeing them put through price increases, too, now? And we've talked about the outlook for the DIY market in the U.K. in general terms for the rest of the year. What are your thoughts for the trade market without sort of asking for your own guidance for the full year, but how do you feel that market is going to pan out in the rest of the year?

[John P. Carter, CEO & Executive Director]

So thanks, Paul. On the P&H, I think Alan has tried to give a bit of an indication as we see the 3 areas of wholesale, the online and let's call it the branch business. All the progress has been made on all 3. As Tony explained back last August, this is really building on the work we did with the infrastructure, and Tony has really accelerated the customer proposition work. We're honest enough to say that we do think we're getting some benefit from competitor activity. They're going through similar changes that we did in 2015. We know we're focused very much on the customer, and this has been some really good basic sort of accelerations of the proposition program of stronger core range, better availability and stronger promotional participation. So all this -- again, it's never one thing. It's a combination that's coming together really well. And Tony will be modest enough to say that everything has fallen well for us in this period. The DIY, I think, we watch very closely, Paul, in the sense that making predictions at the moment is challenging. I think, overall, we see a way back to sort of the outlook that we gave for 2018. But you can read the indicators as us. It's very mixed and challenging to read. All I could say is there's a lot of focus on our business and doing the right things. Back on the pricing issue and independents, I actually think the snow that impacted us impacted us at a time when it's thrown sort of the norm to one side because independents would have been impacted like everyone. And the one thing that you don't want to do is start the year on your back foot. So I think there's been more order on pricing because of the impact of the weather in late February, early March. So where we sit at the moment, everyone is obviously pointing to the difficult weather conditions. I think our businesses are traveling pretty well, considering, and we're focusing on all the areas that we aim to sort of deliver back to the indication we gave you back in February.

[Operator]

The next question we have comes from John Messenger of Redburn Europe.

[John Messenger]

Sorry, I'll do the same thing and ask 2, if I could. First one was just you mentioned a bit of the flavor on Contracts. I guess, it's the one business where there is a bit of a forward order book in there in the various parts of the 3 constituents. Are they -- can you just give us a bit of flavor as to how that's developing? Because obviously, it's been a very strong divisional performer for quite a while against the backdrop of kind of non-res and uncertainties there. Is actually the business still looking particularly strong? Is there anything you're seeing in the order book in that division? And then the second question was just, when we look at the split between your combined trade operations and the Consumer, obviously, quite a divergence there. But would it be right to think of the impact of that as being -- effectively, obviously, Consumer, higher gross margins and more leverage. That clearly will probably put some pressure on the first quarter. But looking forward, does it probably mean there is even more emphasis on costs? And would it be fair to say that there are more kind of addressable costs in the Consumer division? Because you've got advertising, there are a number of different cost levers that you can pull. So I'm just thinking, as you are moving forward and how you behave and how you're going to deal with sales evolution, are you pretty confident that actually what has happened in Consumer can be addressed over the next 9 months, I guess, in terms of just staying on track relative to what has happened to the trade side?

[John P. Carter, CEO & Executive Director]

So let's take the second one first, John. There are more levers in Consumer. The important thing is when you pull levers, that you don't damage the business over the medium term. So Simon and the team have been very sensitive to that factor. But as you can see from these numbers, it is challenging in Consumer. And in particular, Wickes is fighting very hard, competing well against its direct peers. But actually, it's very tough in that part of the world. In terms of Contracts, I mean, we've said for some time, we've got 3 brilliant businesses there. Keyline has had a much slower start and directly responsible for the sort of sodden ground and the weather. The underlying order book is okay. I think we watch the second half with a bit of caution, but it is difficult to read the tea leaves at this point in time.

[Alan R. Williams, CFO & Executive Director]

John, I would add, we're clearly watching the fallout from the demise of Carillion as well and the slowdown on some of the contracts there within the subcontractors. And I think that will have a bit of an impact through the second and third quarters on the markets as well. But overall, all 3 businesses are in really good health. So I don't think I would say the slowdown in the Q1 number to be anything indicative at this stage of a faltering order book or anything like that. It is related to the weather conditions, as I was saying.

[John P. Carter, CEO & Executive Director]

Yes. I mean, you'll know this, John, but Contracts division, at least 85%, close to 90% is delivered. So it is going to get sort of hammered in those situations when the roads in the sites were in that sort of state for that period.

[John Messenger]

Brilliant. And sorry, just the -- I appreciate the sales in the quarter. But just because it was mentioned there by Alan, the Carillion point, and particularly the non-Carillion, but the health of the subcontractor base, have you guys got relatively clear line of sight? Or is this kind of an evolving picture as to how many subcontractors have already kind of flagged to your hands up and there have had difficulties already? Yes, are we through the worst? Or is there kind of a rolling issue here that will permeate through the rest of this year?

[Alan R. Williams, CFO & Executive Director]

I think it's somewhat difficult to tell at this stage quite how much longer the impact will go on. We've seen some indications of subcontractors that have struggled, and there are some public examples on some of those. I think that will continue for another 3 to 6 months, but it is quite difficult to predict exactly when and how. If there were anything that were particularly concerning us from a health of subcontractors that's more material, we would've said so in the statement.

[John P. Carter, CEO & Executive Director]

We've got good vision, John, but not 20-20 vision, because it was very widespread. Those are more acutely affected. We're working and got good visibility. It's a ripple effect that sometimes can catch people later.

[Operator]

The next question we have comes from Gregor Kuglitsch of UBS.

[Gregor Kuglitsch]

I have a question again on Consumer. I mean, obviously, one of your competitors, I think, is doing particularly poorly. And I guess there's the sort of outcome strategic review, I think, sort of the next couple of months. So I want to understand how you're setting up the business. Are you kind of in a wait-and-see mode until you kind of get some clarity on that before you perhaps drive harder on costs, given the trading environment? And as a consequence of that, should we be anticipating a sort of disproportionate profit hit in Consumer in the first half? Because, obviously, any decision will only start impacting either way from the second half onwards...

[Alan R. Williams, CFO & Executive Director]

Gregor, just on that, you can imagine we're watching the situation extremely closely. I wouldn't want to go into exactly what our responses are or might be because I would consider that commercially sensitive. I think we are taking the necessary cost actions within the Consumer business, given the slow start we've seen to the year. We will do that irrespective of what our competitors do.

[Gregor Kuglitsch]

Okay. And then -- and I know this is a call on Q1. You may bat this one back, but obviously, with now almost through April, weather has been a bit better. So are you confident that what you're saying on the weather is, in fact, the weather and not a weaker market? So in other words, have you seen, at least directionally, things bounce back towards more in line with your expectations in the few weeks we've had this in April?

[Alan R. Williams, CFO & Executive Director]

Yes. So it is a Q1 call, you're quite right. And in the last paragraph of the statement, we said that the lead market indicators still remain very mixed. I think it's been difficult this year, and you'll probably hear the same thing from peers across the sector. But because we haven't had a consistent [ path ] so far, it's very difficult to read the tea leaves as to exactly where the markets are going. I don't think that's any different from what we saw, particularly in Q3, Q4 '17. I think, if anything, from what you see from retail, the consumers looking more vulnerable or more fragile rather than less at this stage. But there are clearly 1 or 2 more positive things that could come along, for example, the fact that consumer price inflation looks to have abated, and average wage inflation has crossed over again with the CPI metric.

[Operator]

Our next questioner is Howard Seymour of Numis.

[Howard David Seymour, Director of Equity Analysis]

A couple on the Consumer side, if I may, and it just follows slightly, Alan, what you just mentioned there. Because obviously, as we look at the sort of the retail space, things appear to be getting worse. You allude to sort of continued pressure. Are you seeing it getting worse at the moment? Or is the message really there that as it stands at the moment, it's as bad as it was? I appreciate that obviously, there is a weather impact and, therefore, it is difficult to ascertain.

[Alan R. Williams, CFO & Executive Director]

Yes. I think it is extremely difficult to pick out the trend at this stage in addition to the weather impact and the general consumer impact. As to one of the earlier questions -- well, previous question, there is clearly a change in the competitive dynamic that's happened within that DIY sheds market. So I think it's very difficult to pick out a discernible trend at this stage. I would say that DIY is a weak market at this stage.

[Howard David Seymour, Director of Equity Analysis]

Okay, fair enough. And secondly, I totally appreciate what you're saying on pricing, et cetera, not wanting to go into detail. But just specifically on Kitchens & Bathrooms, because traditionally in that market, people can flag price increases and that can help orders ahead, et cetera. Without going into detail, have there been any sort of price movements that you've seen in your business that potentially would have impacted the order intake?

[Alan R. Williams, CFO & Executive Director]

So I don't think that's a particular factor in the market at this stage for us, Howard.

[Operator]

Our next question is Ami Galla of Citigroup.

[Ami Galla, Senior Associate]

Just 2 from me as well. On General Merchanting, I was wondering if you could talk a bit about the trends that you've seen in April. I appreciate you don't want to give us an exact number, but is there any scope to recover some of the share losses that you've taken in that division last year? My second question really is on store closers in P&H. Have we completed the entire store closure process? Or incrementally, should we see that increase over the following quarters?

[John P. Carter, CEO & Executive Director]

So on the P&H side, we have still got 1 or 2 situations that we think we can take advantage of in consolidating. And -- but the large wave of closures has now ceased. And we are now more in more precision, and Tony and his team have got some target areas where we think we can actually benefit with consolidating rather than closing.

[Alan R. Williams, CFO & Executive Director]

On your question on General Merchanting, Ami, and the trends and the relative share position, I think it's quite tricky to tell at this stage relative to performance of the business, given the weather impacts that we talked about during the first quarter. I don't think we're seeing anything particularly unusual going on in the market. I think there is scope to continue to build in the medium term on the investments that we've made in the business. And we remain confident in those investments, that the right things have done to drive the longer-term, sustainable performance of the business.

[Operator]

Our next questioner is Michael Mitchell of Davy.

[Michael Mitchell, Industrials Analyst]

Just to follow up on really from where you were out there, Alan, on General Merchanting. I kind of appreciate it, [ must be difficult to kind of cover ] the online trend, and you've described your own performance in General Merchanting as resilient. But events suggest that market is deteriorating over the last couple of months or your comment earlier about a similar kind of outlook as what we had in Q3, Q4, suggest that actually the market is broadly where we were at the turn of the year?

[Alan R. Williams, CFO & Executive Director]

I think if you try and unpack the weather impact, I don't think we've seen a change in underlying trends within the market.

[Operator]

The next question is Charlie Campbell of Liberum.

[Charlie Campbell, Housebuilding Analyst]

This is Charlie Campbell here. A lot of questions have already been answered, I think, so just one from me. Just on the Consumer division, as we think about sort of Q1 and Q2, could you just give us an idea of how important Easter is and whether that moving from Q2 into Q1 has a meaningful impact when we think about like-for-likes in Q1 and Q2 for this year?

[Alan R. Williams, CFO & Executive Director]

So it's made trickier, Charlie, by the fact that Good Friday and Easter Saturday were in March in Q1; and then the Easter Sunday and Easter Monday, Easter Monday tending to be the bigger overall day of the 4-day weekend, fell in Q2. So I think in the context of the market, we were pleased with our overall Easter trading. So Easter is that period, and the timing of the bank holidays in May relative to where Easter falls are clearly really important parts of the overall DIY patterns of the year.

[John P. Carter, CEO & Executive Director]

Charlie, if it helps, I always tell people Easter at Wickes is equivalent to Christmas at Debenhams.

[Operator]

Our next question is from Andy Murphy of Merrill Lynch.

[Andrew Murphy, Analyst]

Quite a few questions, obviously, have been answered already. But I was just wondering on the Consumer side, the figure of minus 4.6%, given what you're saying about pricing is probably plus 2.5%, let's say, is it fair to say that across that division as a whole, you're talking about probably minus 7% in terms of volumes? And then secondly, on sort of potential efficiencies, can you give us a flavor for what you've sort of got in your sleeve in terms of what actions you could take if conditions got markedly worse in your opinion?

[Alan R. Williams, CFO & Executive Director]

Yes, Andy. So well, you're right, the -- if we look at overall price trends within the business, let's say, I haven't seen a particularly different trend between the General Merchanting, Plumbing & Heating and Consumer businesses. Contract Merchanting, we've seen a bit stronger pricing, given some of the commodity-related elements and [ wealth-trailed ] supply chain issues and some of the materials that we use within those markets. So the -- I answer it by saying the trend in Consumer is not that different from General Merchanting or P&H. So in terms of further cost levers that we can pull where, obviously, if things get markedly worse, I think we took actions 10 years ago within the business in a -- at the time the global financial crisis to take cost out. If you want to look at a very negative scenario, I think you'd be looking at similar actions to what we've taken at that stage. At this stage, we are -- we talked a bit about this at the end of February with the full year results that we're -- actions that we were taking on the supply chain and distribution side on Kitchen & Bathroom, which we've done, there are some further actions that we are contemplating on the supply chain side. And we can look at, for example, delivery patterns. And then we're looking across the range of disciplines within stores around manning as well as elsewhere within the business around where we recruit, how we fill vacancies, et cetera, et cetera.

[Operator]

The next question is Clyde Lewis of Peel Hunt.

[Clyde Lewis, Analyst]

I think I've still got 3, if I may. First one, on the -- when you refer to sort of broadly flat sort of volumes and sort of pricing maybe driving the overall growth, are you talking on a like-for-like basis or on a total sales basis? Just to sort of clarify on that point.

[Alan R. Williams, CFO & Executive Director]

Yes, it would be more on the like-for-like.

[Clyde Lewis, Analyst]

Okay. Regionally, have there been any material differences in terms of sort of activity levels across the country?

[John P. Carter, CEO & Executive Director]

Not noticeably, Clyde.

[Clyde Lewis, Analyst]

Okay. And the last one was on your sort of outlook comps and your indicators. You talk about sort of a mixed bag of indicators. I'm just wondering, which ones you would read as positively at the moment? That was all.

[John P. Carter, CEO & Executive Director]

I think it's a variation on different degrees, Clyde. Yes, look, housing transactions are not tanking and -- but -- and consumer confidence is holding up relatively well against the long-term average. You can read them as much as I can. We have to have a bit of caution. But equally, we remain overall with what we can see in front of us pretty positive in terms of delivery across 2018.

[Alan R. Williams, CFO & Executive Director]

Clyde, I think in these tricky certain markets, you have to look a lot to self-help, and that's certainly what we are doing at the moment.

[Operator]

Our next question comes from Lush Mahendrarajah of Berenberg.

[Lushanthan Mahendrarajah, Analyst]

Two questions, if I may. The first is on Plumbing & Heating. You were saying at the full year results that like-for-likes have been pretty good this year, but you might see some softness on the margin front. Given like-for-likes have been so bad than, I guess, most people anticipated, is that beneficial or detrimental to your margins versus what you're expecting at the start of the year? And then secondly, on Consumer, obviously, one of your competitors is seeing issues if and/or when their potential sites come up for sale. Would that something you'd be interested in? Or are you still happy with that portfolio?

[John P. Carter, CEO & Executive Director]

I think we'll sit and watch and won't comment at this stage regarding that competitor. In terms of -- I don't actually remember the comment regarding margin.

[Alan R. Williams, CFO & Executive Director]

So on Plumbing & Heating, I think there's nothing from a gross margin point of view within the division that will be remarkable or different in terms of the trend. I think...

[John P. Carter, CEO & Executive Director]

Or you think there's a mix.

[Alan R. Williams, CFO & Executive Director]

Yes, I think from a mix point of view within the group overall, remember that Plumbing & Heating is lower margin than the General Merchanting division or Consumer. So there is a slight adverse mix to the group that is not material overall.

[Operator]

Our next question is Aynsley Lammin of Canaccord.

[Aynsley Lammin, Analyst]

Just 2 quick ones, I think, left for me. Firstly, I wondered, any changing kind of trends in bad debt, anything you can say there? And then secondly, just on the cash flow side, obviously, you're cutting cost, but wondered if you -- if that's a pounds million in your numbers you've decided to cut CapEx for the full year against what you would have expected late last year, or any kind of changes to working capital flows we should be aware of?

[Alan R. Williams, CFO & Executive Director]

Aynsley, we've not changed the CapEx guidance from what we said at the full year results by the end of February. Just in terms of the trend on bad debts, as we were talking about earlier, there's 1 or 2 minor specifics within the Carillion subcontractor environment. We have insurance against some of those debts. But overall, it would be, at this stage, no different to the -- from the normal pattern that we see or normal bad debt percentage reserve.

[Operator]

We currently have no further questions.

[John P. Carter, CEO & Executive Director]

So then thank you very much for your time, and we'll see you in late July. Thank you.

[Alan R. Williams, CFO & Executive Director]

Thank you.