In accordance with paragraph 31 of the 2018 UK Corporate Governance Code, the Directors have assessed the viability of the Company and the Group over a three-year period to 31 March 2023. The Directors believe this period to be appropriate as the Company's and the Group's strategic planning encompasses this period, and because it is typically a reasonable period over which the impact of key risks can be assessed within a fast-moving retail business. The Directors are mindful, however, of the heightened uncertainty driven by the COVID-19 pandemic and accept that forecasting across this time frame is now materially more challenging and have therefore also focused on understanding the level of headroom available before the Group reaches a position of financial stress.

In making this viability statement, the Directors have reviewed the overall resilience of the Group and have specifically considered:

  • a robust assessment of the impact, likelihood and management of principal risks facing the Group, including consideration of those risks that could threaten its business model, future performance, solvency or liquidity or sustainability. The assessment of viability has specifically considered risks that could threaten the Group's day-to-day operations and existence. The assessment considered how risks could affect the business now, and how they may develop over three years; and
  • financial analysis and forecasts showing current financial position and performance, cash flow and covenant requirements.

The Group's business model and strategy are central to an understanding of its prospects, and details can be found in Our Marketplace.


The Group undertook a review of the previously approved financial plan and forecasts in light of the current economic uncertainty existing surrounding COVID-19. The previously approved plan had taken account of existing factors such as Brexit. The output of this review has created a new base case for the period ending 2 April 2021 where short-term volatility is expected to have an adverse effect on the results. The future years included in viability modelling have been constructed with reference to the revised base case to create a new three-year 'Viability Scenario' upon which the Board has made its assessment of the Group's ongoing viability. This has also been used as the basis for the Group's review of going concern.

Assessment Process and Key Assumptions

The Viability Scenario takes into account all of the principal risks and uncertainties facing the Group across the three-year period in order to assess the Group's ability to withstand multiple challenges. It assumes that a new like-for-like revolving credit facility is obtained on the expiry of the current facility in September 2022. The impacts of COVID-19 have been built into the scenario, but the impact of further one-off 'black swan' events that cannot be reasonably anticipated have not been included.

Key Assumptions

  • Sales for FY21 are 16% behind FY20, with FY22 seeing a recovery to FY20 levels, with low single digit growth thereafter.
  • Store and garage rent and rates remain largely flat with the Government business rate holiday concluding in April 2021.
  • No payment of a final dividend for FY20, and reinstated thereafter.
  • Working capital requirements reduction of £16m year on year.
  • Capital expenditure commitment of £25m in FY21 to deliver the minimum elements that the Group requires to keep in touch with evolving customer and operational necessities in line with the Group Strategy but with a deceleration of pace of change.

Mitigating actions have been taken in year one to preserve cash which include, but are not limited to, reducing planned capital, marketing and non-essential spend; suspension of the dividend for the period ended 3 April 2020, and a reduction in working capital balances focusing predominantly on reducing inventory balances. External mitigations include the utilisation of the Government business rates holiday and job retention scheme.

The Group has also assumed a prudent and realistic efficiency programme, which it had already set out to do, to commence in year one to mitigate the impact of the reduction in sales following COVID-19. The main factors include reducing working capital spend, delivering elements of the strategic change programme that drive up sales and margin and achieving plausible cost efficiencies in payroll, property and discretionary spend.

The Board considers this scenario to be reasonable. Since the COVID-19 crisis began, the Group was able to reopen most Retail stores, garages and mobile vans at the commencement of year one. The Group is uniquely positioned to keep the UK's cars and bikes on the road and safe to drive or ride, providing vital support to emergency workers, fleet operations, key workers and the general population as they travel for essential supplies and, where required, attend places of work. Sales to date in FY21, are 32.9% higher than the base case.

Assessment of Viability

Although the Viability Scenario reflects the Board's best estimate of the future prospects of the Group, the Board has also tested the potential impact of a severe downside scenario ("stress test"), by quantifying the financial impact and overlaying this on the detailed financial forecasts in place. Rather than creating numerous scenarios that model the large number of uncertainties in the current climate, the Group has tested the Viability Model to understand how far sales would have to decline before the Group's banking covenants are breached and when it would no longer meet its liquidity requirements. This scenario has taken into account aspects of principal risks, greater reduction in sales in FY21, a much smaller recovery in sales in FY22 and beyond; and a significant reduction in cashflow to invest in and transform the business.

In modelling this stress test, the Board has assumed no spend on transformational and strategic projects and a more aggressive, but achievable, cost efficiency programme, which would, for example, include a reduction in the store estate. This includes a significant reduction in year one performance as a result of COVID-19 with sales down 30% on FY20, and a much slower recovery in years two and three with sales not recovering to pre COVID-19 levels over the period under review. The cost efficiency programme is assumed to accelerate to a total of £27m during this period to mitigate the reduction. Should this cost reduction not be achievable, the Group would breach its covenants.

In order for the Group to become unviable, sales would need to fall to £884m in year three, which is a decrease of 23% from the levels achieved in the year ended 3 April 2020.

Unprecedented uncertainty arises because of COVID-19. The Board has made its best estimate of a hypothetical and severe scenario for the purpose of creating outcomes that have the ability to threaten the viability of the Group. Should the outcomes be significantly worse, the Group would have to consider further mitigating actions, for example further suppression of capital spend or dividend payments, accessing increased debt facilities, or requesting further covenant waivers.

The outcome of the stress testing demonstrates that due to the stability of the Group in its position as a designated provider of essential services, playing a critical role in keeping the UK moving, it would be able to withstand the impact of a sustained downturn occurring over the period of forecast by making deliverable adjustments to its operating plans.

Viability Statement

The Board has a reasonable expectation that the Group and Company will be able to continue in operation and meet its liabilities as they fall due; retain sufficient available cash and not breach any covenants under any drawn facilities over the remaining term of the current facilities. As is customary when dealing with longer-term debt facilities, the Board would expect these to be renewed well in advance of their next term.