As I promised in a prior message, here is a more “business-y” update further to the recent completion of our year-end forecasts and a lookback on our first 100 days since Canada and the US reported the 100th confirmed case of COVID-19.
There is no question that the intensity and speed of the pandemic took all of North America by surprise and we profoundly underestimated the onset and initial disruption of COVID-19. Once we recognized the growing uncertainty around the duration and severity of the outbreak in our communities, B&M responded decisively and boldly as a total company.
During March, we enacted a series of cost reduction and cash preservation measures to quickly address the decline of B&M business activity, the potential impacts of an extended business shutdown and the looming financial uncertainty surrounding the COVID-19 crisis. At the time, we could see that government-mandated restrictions, project closures, and customer shutdowns were sharply reducing our ability to go to work but we had no way of estimating the extent of the pandemic nor quantifying the effects on our business. As a result, we took steps to immediately cut costs and raise cash to soften the impact of declining billed sales and to fortify our financial position. This included: reducing corporate and regional expenditures; deferring non-critical investments; scaling back company programs and internal initiatives; extending payment terms with suppliers and aggressively pursuing receivables and outstanding claims.
As the pandemic unfolded, it became quickly apparent that many of our regions would experience substantive decreases in short-term activity, necessitating work reductions, shorter hours, and temporary layoffs. As a result, we asked our management to take a preemptive step forward to reduce our payroll costs and enacted a 20% interim salary reduction for Corporate Officers, Regional Vice Presidents, Directors, Controllers and Division Managers. This was a universal move made in all Regions and our corporate support groups in spite of local pandemic business effects.
As Ian and I said at the time, this was not a decision that was made lightly. It was done in the interest of fiscal prudence and also for the purpose of demonstrating to all employees suffering work hour reduction and layoff that we were all in this crisis together and that we were all willing to make personal sacrifices to protect the collective wellbeing of the total company.
We have been tracking the decline in business activity from Feb 29, 2020, a date which we designated as the beginning of COVID-19 for the purposes of benchmarking (based on the last month end before we began identifying direct business effects to B&M such as work deferrals). Our work volume declined by almost 30% in the six weeks following Feb 29, reaching its lowest point during mid-April following the widespread construction shutdown in Ontario and Quebec. By that point, 1482 people or 28% of the workforce that had been active on Feb 29 were temporarily laid off. Since that time, our fortunes have improved. As of June 1, we have returned 641 or 43% of our sidelined staff back to work and our hours-worked continue to trend upward accordingly.
As a total company, we were fortunate that not all Regions and business lines experienced the same amount of contraction. For example, government lockdowns did not materially affect our Utility or FMO businesses while commercial construction and service suffered more. Some of our bigger Regions were hit hard while other operations only experienced momentary downturn. In spite of the setbacks and disruptions of March and April, we are now in a stable position. We have been successful at maintaining our cash reserve which is vital to financing our business activities. We are currently forecasting to earn half of our original budgeted 2020 profit by the end of our fiscal year on October 31 with some opportunity for improvement. In any other year, we would be very disappointed but looking through the lens of the pandemic, we are quick to identify our good fortune.
In spite of our progress and rising optimism, we are still a long way from restoring full capacity. We have 841 of our Feb 29 complement of people who remain laid off and many who are working shorter weeks and reduced hours. This is clear demonstration that we are still in the process of regaining our footing from the initial economic shock of COVID-19. Nonetheless, we remain committed to a complete recovery and returning everyone to their regular level of work and pay.
To this end, we now feel sufficiently confident in our business activity, the relative health of our backlog, and our revised 2020 year-end forecast to begin the process of restoring regular salary levels for those who experienced mandated reductions. We are very grateful for the sacrifices people have made on behalf of the company. At a time of B&M’s direst need, we asked many people to work more and yet receive less. We greatly appreciate your patience, loyalty and hard work during this very challenging time.
It is important to recognize that many financial and operational risks remain. There are significant risks that will affect our ability to successfully complete our work-in-progress as forecast and to build backlog for 2021. We are still assessing the negative impacts of COVID-19 protocols on productivity and job cost. Some of the industries and customers we serve remain in perilous condition with no prospect for a near-term recovery. The recessionary shock of COVID-19 has dramatically slowed the global economy and will undoubtedly reduce the capital spending that drives the construction industry.
As a result, we are maintaining many of the cost containment and austerity measures implemented in March. We will continue to carefully review our performance and activity frequently to sharpen the focus of our 2020 financial year and the outlook for 2021. While our confidence in our business outlook is improving, we may not return to “normal” capacity for some time as the longer term effects of COVID-19 manifest in the broader economy and the virus lurks in our communities.
Let’s be clear: the pandemic is not over. The ominous threat of a second wave or an internal outbreak within B&M remain sharply defined on our horizon. We will be working to control the hazard and business consequences of COVID-19 for the foreseeable future and we each need to continue our thoughtful, vigilant and cautious approach in order to sustain the success and current momentum of our recovery. We cannot afford a moment of neglect with respect to hygiene and physical distancing. It is simply isn’t worth it.
Thanks as always for your efforts and genuine care. We are ascending so please stay positive.