Editor’s note: This article is part of our A Year of Evolution: CFOs on 2021 series featuring insights from finance leaders across industries and their COVID-19 lessons and 2021 plans. To receive weekly updates on this series, sign up for the CGMA Advantage newsletter.
For iconic UK and Ireland DIY and home improvement brand B&Q, 2020 was a rollercoaster year. Its first quarter year-on-year like-for-like sales were down nearly 22%, but its third quarter sales announced in November bounced to 24% growth.
This reversal in performance led B&Q’s parent company, Kingfisher, to announce in September it planned to return £23 million of support under the UK government’s furlough scheme. And in December it said it would return £130 million of business rates relief to UK and Irish governments — a move similar to that made by the large UK supermarkets and other retailers.
Kingfisher operates across Europe, with nearly 80,000 employees and more than 1,300 stores. Its two UK brands are B&Q and Screwfix.
Leading B&Q’s finance team throughout the past year of “polarised demand levels” has been chartered accountant Geoff Bryant. He spoke to FM about how the business had focused on safe trading, conserving cash, and increasing its e-commerce investment. Looking to the year ahead, Bryant also described how finance is building flexibility into its planning processes.
What did you do during the first wave of the pandemic that you consider a successful crisis response?
Bryant: B&Q took a very responsible measured approach to the first wave of the crisis. Leading up to the first lockdown in the UK, we saw a big spike in demand, and we took the difficult decision that we needed to close the stores to give ourselves a bit of time to make sure we could establish safe trading practices. We very quickly, though, established a contactless click-and-collect service, making sure that our customers could get a hold of the essential products they need to keep their homes repaired and maintained.
We then worked to get the stores reopened. We made sure we put in place social distancing in the stores. We made sure staff had enough PPE [personal protective equipment] and obviously increased the cleaning routines in stores, as well. Throughout the crisis, we've prioritised the safety of customers and colleagues, and that's been recognised beyond the sector.
Has the pandemic delayed any of your business or finance team's ongoing projects?
Bryant: During the first wave, while the outcome remained uncertain, we did cancel and delay a number of projects. The absolute focus, at that time, was making sure that we got stores reopened and trading safely, also making sure the business was financially secure. So that's where all the focus went.
The other thing that we did that impacted on projects was we decided to furlough a number of our store staff and a number of our head office staff, including some of the finance function, which was obviously quite challenging. But I have to say the teams responded incredibly professionally. When they came back into the business once we started to come through the crisis, they all came back, responded very positively, and have really helped us to get the business running and motoring as demand has increased.
While we did delay some projects, the crisis created a situation where we actually accelerated a number of initiatives. We did a lot to improve the e-commerce side of our business, and within the finance function, we did a lot of work around our cash flow forecasting.
We had already planned to make some improvements, but the pandemic obviously focused our attention on that, and we were able to put in place a much more agile, more frequent cash flow forecast that ultimately proved to be more accurate and more reliable using better system reports.
Are you still in a crisis mode, or have you returned to pre-COVID-19 operation levels?
Bryant: The business absolutely remains on high alert while the outcome of COVID still remains uncertain. The business is facing ongoing changes in restrictions. We're also seeing some big changes in the demand levels.
We've got clear processes and governance to make sure that when something does change, we adapt and react to it very quickly. So to a certain extent, working in this slightly uncertain environment has become business as usual for us now.
How has productivity been impacted as some staff works from home?
Bryant: For our head office, the majority of our teams have been working from home throughout most of 2020. For a lot of staff, it's proved to be quite a positive experience. I would say productivity levels have been very good working in this way. Lots of people have commented to me about the opportunities that working from home gives them. They feel that they're able to better manage their work/life balance and make work fit around what they need to do at home.
But we do recognise there are some downsides to it. I think people miss the social interaction that comes from working in the office. From a development perspective, having those face-to-face conversations are really important to people, in particular for some of the more junior members of staff. In finance, we have a number of apprentices working for us. We can hopefully get back in the office at some point and provide them with that face-to-face development that will really help them.
And what about cash and costs?
Bryant: At the start of the crisis, when the outcome was very uncertain, we absolutely went into that mode of conserving cash and protecting spending. We cut back on any nonessential spend that we had at the time. We worked closely with our suppliers to make sure that we protected cash flow. We looked at the government support that was available and took advantage of some schemes.
But then for our business, as we came out of an initial difficult trading period, sales recovered very well, and actually we've had to almost turn the taps back on and reinvest into the business to support the areas that have been seeing significant growth. So that's investing into our website, investing in more staff in stores to care for that increased demand, and increasing the cost that we have to support the logistics network to manage the stock coming into the business.
It has given us some options of things to do, and it has been really pleasing that as things have recovered, we've been able to make sure that we reward our staff appropriately. So the guys on the frontline in stores, on the shop floor, we've now paid them a bonus at the end of the first half of the year, and we've also been able to voluntarily repay the money that we took under the UK government’s Coronavirus Job Retention Scheme and business rates, too.
And what's your most important priority now?
Bryant: So it absolutely still remains to make sure that we can maintain safe trading. That is the number one priority.
Securing stock availability is probably our next biggest priority at the moment. We've seen some challenges for suppliers. They've obviously got social-distancing measures in place, and increased demand has created some pressures on some of the raw materials that they need. So we're having to work very closely with them, very collaboratively, and also with our third-party logistics providers to ensure we have products available for customers when they need them.
What are the biggest threats currently to the business, how are you overcoming those, and what indicators are you tracking?
Bryant: As always there are multiple risks and opportunities faced by our business. I think one of the biggest challenges is the polarised demand levels that we're seeing across our categories. In that space, we're tracking availability ratios, so how much of the range or what proportion of the range is available to customers in each individual store and online.
We're also tracking stock levels and how many purchase orders we have in the supply chain. And then absolutely focused on what customers are telling us and what they're seeing, and so customer feedback measures like net promoter score help with that. We take a holistic view to factor what's going on, and then obviously the business adapts to that.
We've also put in place much better forecasting. We've put in place stronger communication with our suppliers, stronger communication with our customers, and I think all of that is helping us to come through the challenge.
What do you see as the main constraints for the business in 2021?
Bryant: There's still a lot of uncertainty about how things will be in 2021. We still will have a lot of restrictions in place, and clearly how those restrictions will play out is uncertain, as are the macroeconomic impacts, both in terms of the fallouts from the COVID crisis but also how things like the impacts of Brexit are likely to be felt.
What 2020 has proved to us, though, is as a business, we're quite resilient. We've proved we can adapt, flex, and rise to the challenges that are faced by the business when we have this uncertainty. I think a lot of that comes from the people that we have in the business. We have a very strong team at B&Q.
What approach have you taken to budgeting for 2021, and has that been different from previous years?
Bryant: Clearly, at the moment, we are seeing high demand levels, so we're having to set the business up to cope with that, making sure that we're investing in the areas we need to support that growth, so making sure that we've got enough staff in stores, making sure our supply chain is set up to cope with the demand. But we're trying to make sure while we're doing that, we're doing it in as flexible a way as possible.
So an example might be where we're buying additional stock. We're making sure we're investing into our best-selling products. And where we're doing it with suppliers, trying to make sure we're doing it in places where we have faster and shorter lead times that gives us more flexibility.
How will the pandemic impact both the finance team’s and also the business's digital transformation journey?
Bryant: We're already on a journey with e-commerce. Every retailer is facing increasing competition online. Customers are being more demanding in that they want easier online shopping journeys. They want click-and-collect services. They want home delivery. That's absolutely a trend that I'm sure will continue into the future.
We’ve already made good progress and, as we go further into 2021, we are looking to continue investing to meet that increasing customer demand for more e-commerce, and it's essential as a retailer that we do that.
What has been your biggest lesson from the pandemic?
Bryant: It sounds obvious, but focusing on good communication and focusing on the engagement and wellbeing of our colleagues.
What one piece of technology is a must-have in your 2021 budget?
Bryant: Continued investment into e-commerce.
Looking ahead, what is one skill you want to develop in your team?
Bryant: More a value than a skill, but the B&Q finance and legal function are focused on simplifying our processes.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.