Wickes Group plc

Good morning and a very warm welcome to Wix's first set of results since its return to the public markets in April. My name is Chris Rogers and I joined David, Julie and the team as chairman ahead of the demerger, stepping down from the board of Travis Perkins where I had been senior independent director and a non-executive director since 2013. The demerger of WICs was thoughtfully executed and well planned. David has built a strong team and we have assembled a bench of experienced and relevant independent non-executive directors. And as a board, we are very focused on creating value over the medium term for all our stakeholders. With its digitally led, service enabled approach, David and his team are building a business for the future. The continuous focus on improving the relevance of the core for the customer and the emerging position in DIFM has created a uniquely balanced business. A business with a very clear and distinctive position in the market which, with its newly found independence, can be even more agile and responsive to the ever-changing needs of its customers. The last 18 months has been a huge challenge, but as these results demonstrate, the team at Wix have been equal to it, and I would like to thank each and every colleague for the part they have played. Thank you for listening, and I will now hand you over to David.

Thank you, Chris. And I'd also like to welcome everyone and thank you for taking the time to join us this morning. I'm here with our CFO, Julie Worth, and we are delighted to share with you our very first half year results as a standalone business since we de-merged from Travis Perkins back in April. Julie and I will spend the next half an hour or so taking you through the performance of the business for the six months to the end of June, as well as highlighting our key levers for growth and outlook for the rest of the year. This has been a good first half with strong sales and profit performance across the business. And I would like to echo Chrissie's thanks to all our colleagues. During this period, our uniquely balanced business model has really come to the fore. We have benefited from our differentiated customer proposition and digitally-led, service-enabled operating model, which has allowed us to thrive throughout the pandemic. Two thirds of our sales were driven from digital channels in the first half of 2021, and retention of our digital shopper base was strong, having grown this substantially in 2020. Over the past 18 months we have successfully transformed and innovated our business, swiftly adapting to changes in consumer behaviour as people seek to improve their homes and gardens as they spend more time in them. Both our store and distribution environments handled record levels of throughput, driving strong operational leverage by continuing to develop and refine working practices. As we grew our customer base, we continued to deliver improvements across our key customer satisfaction measures and gained market share. And we were very pleased to win the DIY Week Retailer of the Year award earlier this summer. The last few months have seen many challenges in our sector, with well-trailed global supply issues, constraints on raw materials and subsequent cost inflation. Whilst we are not immune to these challenges, we consider that our strong supplier relationships, curated range and operational agility has served us well to continue to provide customers with the products they need at competitive prices throughout this period. As a standalone business, we are better positioned than ever before to capitalise on our exciting growth opportunities. This morning, I'll take you through the great progress we have made across each of our growth levers as we continue to involve and enhance our proposition through product and service innovation. I'll now hand over to Julie to take you through the numbers in more detail.

Thank you David and good morning. I too am delighted to be presenting our first set of financial results today. We have had an exceptional first half despite the ongoing impacts of COVID disruption. We added almost 200 million of sales year on year and we were particularly pleased with our core sales performance where we continue to take market share. We have stepped forward from what would have been an underlying loss last year, excluding government support, which was subsequently repaid, to a profit of £46.5 million, with an operating margin of 7.6%. There was strong cash generation and balance sheet deleverage, albeit that investment is second half weighted. And there were also some timing benefits on working capital, which will unwind in the balance of year. We have announced a maiden interim dividend of 2.1 pence per share, which will be paid on the 1st of November. So let's now look at the results in a little more detail. First half sales were up by 32.5%. Within this, we estimate price inflation of around 3%, although much of the inflationary impact was only seen in the latter part of half one, with this expected to be more marked in half two. Space accounted for a reduction of 0.6% from our ongoing space optimisation programme. And we had 232 stores as at the half year, a reduction of one store from our year end position. Our gross profit percentage, as expected, was down, declining by 60 basis points. As highlighted at Demerger, we expected a normalisation of promotional activity compared with the prior year, when the focus across the industry was on handling the first lockdown. Local trade has performed strongly, which delivers a lower level of margin through category mix and also from TradePro participation. In addition, within Do It For Me, bathrooms and installation performed particularly well, both carrying a lower level of percentage margin. Our approach to price inflation is to recover cash cost increases through price. This protects cash gross profit whilst ensuring we remain highly competitive, but clearly reduces percentage margin. As you may recall, distribution costs are recognised through our cost of sales, and the effect on gross margin from these factors was partially offset by operational cost leverage through our distribution activity, supported by strong volume growth. Customer delivery participation remains at elevated levels, indicating a more sustained change in customer behaviour. In the first half of last year, we had taken the benefit of a number of elements of government support which were subsequently repaid in the second half. If we exclude the impact of these, our cost to sales ratio improved by around 600 basis points, again demonstrating strong cost leverage supported by volume growth. Adjusted PBT at £46.5 million is slightly ahead of our £45 million guidance. I also note the underlying tax rate of 21.1%, reflecting a lower level of disallowables than previously indicated. Overall, a very strong performance considering that our business continued to be impacted by COVID disruption. So let's look at how sales trends evolve through the first half. This graph shows the weekly ordered like for like sales trends year on year and right now it continues to be helpful in articulating sales performance through these dynamic times. It is worth noting once again that do it for me ordered sales move into reported sales only when deliveries and installations are completed. Our one-year sales trends show core, indicated by the blue line, performing well against pre-lockdown trading last year, and we delivered Q1 core like-for-like growth of 38.5%. Core sales then accelerated against the lockdown one period last year, when our stores operated for click and collect and home delivery only for a number of weeks. As we anniversaried the reopening of stores last year, core sales for the last few weeks of the first half were in line with the strong post-lockdown trading period. And we delivered Q2 core like-for-like growth of 34.2%. Within Do It For Me, indicated by the red line, our showrooms remain closed through to the 12th of April. Despite this, and supported by our digital capability, together with our newly developed virtual showroom journey, we achieved a significant proportion of prior year sales through the Key Q1 trading period. And as our showrooms reopened, sales recovered strongly. If we now look at delivered sales on a two-year like-for-like basis, core like-for-like sales growth remains strong throughout the first half, slowing into Q2, whilst continuing to deliver an increase of 38.4%. This performance has been achieved across a broad range of product categories, where we continue to innovate through range reviews, and is supported by both DIY and local trade. Within Do It For Me, like for like declined as a result of showroom closures in both the prior and current year. However, we still achieved over 70% of 2019 delivered sales, supported by a virtual showroom journey. It is also worth noting that two thirds of our sales continue to be driven from digital channels, demonstrating the strength of our digitally led capability, which also underpins this sales performance. I will come back and talk about current trading and outlook shortly. So moving on to the profit bridge. This slide shows the major movements in profitability on a year-on-year basis. In the first half of last year, adjusted pre-tax profit was £14.5 million. As already noted, this included £17.3 million of government support, which was subsequently repaid. Excluding this support, the first half of last year would have shown a loss of £2.8 million. In the first half of the current year, the strong performance of core sales and the high level of operational gearing generated £52 million of incremental profit, clearly a significant driver of profit improvement year on year. Do It For Me contributed £4.5 million, the result of delivered, like-for-like sales growth of 20.5%. This reflects a lower level of operational gearing, impacted by temporary showroom closures, lower margins on bathrooms, which grew strongly, and installation participation, which continues to grow. Investment in marketing has stepped up again year on year as we return to more normalised levels of activity, notably to support Do It For Me. COVID costs continue to rise as we annualise the first quarter of unrestricted trading last year, and we've remained cautious in terms of changing our COVID policies to protect our colleagues and customers. We are, however, confident that, subject to further trading restrictions, COVID costs will start to fall away in the second half of the year. Additional PLC costs were £1.9 million as we progressed towards our guided figure of £7 million on a full year basis. Overall, a strong step forward in profit terms, significantly benefiting from strong core sales growth combined with operational leverage. Our IFRS 16 net debt position at the end of the first half was £564.8 million, compared with a pro forma net debt position at demerger of £665 million. The improvement of around £100 million splits down as a £21 million reduction in IFRS 16 lease debt and a £79 million improvement in cash. IFRS 16 lease debt reduced as a result of fewer lease renewals in the period. This is consistent with the lease profile of our business which sees a low level of renewals over the next few years and IFRS 16 lease debt is expected to continue to decline modestly. This is clearly a timing factor as these leases will eventually be renewed influencing the net debt position in the future. Cash balances, excluding the impact of the demerger, increased as a result of strong operating cash flow and a favourable working capital position. Stock recovered from unusually low level in the prior year, which was impacted by COVID disruption, noting that there was a further improvement in stock turn to 5.6 times. Overall, our cash position in half one benefited from the second half weighting of capital and IT separation investment, together with timing impacts within payables, which will partially unwind in the balance of year. We will of course also pay dividends for the first time in half two. As a reminder, we reiterate here our capital allocation priorities. You won't be surprised to hear that there are no changes to our capital allocation policies as set out at the time of demerger. The first priority is to continue to invest in organic growth and innovation. This includes a very successful store refit programme, digital investment and range development. Full year capex guidance of around £30 million remains unchanged and we continue to expect to invest around £40 million in IT separation over the next couple of years. It is worth noting that in 2021 our capex and IT separation investment will be weighted to the second half of the year. We will continue to maintain a strong balance sheet holding net cash as a partial offset against our lease liabilities and maintaining the 80 million RCF for liquidity purposes. Our guidance remains for a full year dividend payout of 30% of post tax profit. We are in the early stages of life as an independent PLC and are comfortable with the current capital structure and capital allocation priorities. Moving forward, we will continue to review these and notably consider an appropriate IFRS 16 based leverage target as we emerge from these dynamic times. And finally from me, our outlook. As we expected, core performance has now moderated as we continue to annualise strong comparatives in 2020. However, we continue to see strong core sales on a two-year basis. This is notably driven by buoyant demand from local trade and continues to be underpinned by our digital capability, demonstrating once again the resilience of our balanced business model. Following a strong Q2 from an order perspective, Do It For Me orders have normalised over the summer and for Q3 are currently broadly in line with 2019. We remain optimistic about the future opportunity in Do It For Me and a good example of this is in bathrooms, where we have seen particularly strong growth following the relaunch of our new bathroom ranges in stores over recent months. As a result of very high market driven demand for installers and builders, combined with ongoing COVID disruption, we are, however, experiencing longer lead time to project completion, which will result in a higher carryover order book into 2022. The combination of these factors together with half year results ahead of guidance is expected to deliver full year adjusted PBT towards the upper end of market expectations. This of course remains subject to any further COVID disruption or restrictions. Noted here also are some slightly amended technical guidance points on week 53 and the underlying tax rate as we continue to refine our modelling. I would now like to pass back to David, who will take you through the operational review. Thank you.