Wickes Group plc

Good morning everyone and thank you for joining us today for what is our first four-year results presentation as an independent company since emerging from Travis Perkins last April. I'm here with our CFO, Julie Worth, and together we would like to take you through the performance of our business for the year ending the 1st of January 2022, as well as highlighting how we intend to maximise our growth levers to take full advantage of the opportunities in the UK's large and growing home improvement market. Julie will also share our outlook for the year ahead and give an update on our capital allocation priorities. 2021 was a milestone year for Wix as we embarked on our journey as a standalone business and delivered record financial results. Our strong performance was underpinned by our uniquely balanced business model across the three distinct customer propositions of local trade, do it for me and DIY. This model enabled us to successfully navigate the pandemic, respond to fast-changing consumer trends and fulfil growing customer demand, leading us to outperform the UK home improvement market by twofold. While the market grew by around 6% to £26.5 billion, our sales grew at around 14%. We have continued to grow our customer base and critically retain those customers who were already shopping with us. Customer satisfaction is up and we have gained further market share. All while delivering excellent value and availability despite challenging external factors. We are making considerable progress across each of our strategic levers and as such we are accelerating investments into a number of these to take full advantage of the market potential and importantly to deliver innovative new products, services and stores to our customers. We now have a capital structure that facilitates our ability to grow the business and deliver superior returns. I'd now like to hand over to Julie to take you through the numbers.

Thank you, David. Good morning, everyone. I would like to echo how delighted we are to be delivering our first set of annual results as a listed business. WIC's financial performance in 2021 reflects a strong, balanced, and resilient business model where, despite ongoing COVID disruption, revenue grew on a like-for-like basis by 13% to one and a half billion. Our strong revenue growth, together with operational cost leverage, delivered adjusted profit before tax of 85 million pounds, representing growth of over 70% year on year. our net debt position has improved significantly to £690 million. This reflects our lease renewal profile and, unusually for our business, working capital outflow for 2021 as we recovered and strengthened our stock position year on year. we have declared a final dividend of 8.8 pence, taking the total for the year to 10.9 pence, and this represents 40% of adjusted post-tax profit for 2021. This is ahead of the 30% indicated at the time of demerger and reflective of our updated capital allocation framework, which I'll come back to later. It also reaffirms our strong 2021 performance and overall confidence in our business model. Overall, an excellent set of results of the year. So let's look at those results in a little more detail. Within our total sales growth of 14%, inflation accounts for around 7% of that growth, with rates accelerating into the second half of the year from 3% in the first half. As anticipated, our gross profit margin declined by 80 basis points. This was partly impacted by mix, with local trade, bathroom and installation participation increasing, but most notably this reflected the recovery of inflation on a cash margin basis, which negatively impacted the margin rate. This approach has enabled us to continue to offer customers the best possible value and drive revenue growth ahead of the market. Our cost efficiency has improved by 230 basis points, reflecting the strength of operational leverage, partially offset by incremental PLC costs as previously guided. There was a return to more normalised levels of marketing activity and the payment of bonus reward across the business, recognising the strong overall performance for the year. Overall, we have delivered operating profit of £116.3 million or 7.6% of sales, which compares strongly with both the prior year at 6.1% and perhaps more notably 2019 at 7.4%. It has, though, been an unusual journey from an ordered sales perspective through 2021. This slide, which shows weekly ordered like-for-like sales performance, is purely a reminder of the unusual trading conditions through the year, where our do-it-for-me showrooms were entirely closed through to mid-April. We also annualised periods of lockdown in 2020 and saw further disruption through periods of self-isolation across 2021. Our delivered sales performance, however, continued to be strong and resilient in the face of this disruption. This slide shows the two-year delivered like-for-like revenue performance through the lens of first half, second half and the split between core and do-it-for-me revenue growth. As a reminder, delivered rather than ordered revenue represents what we recognise in the accounts. Core revenue performance was extremely strong in the first half of the year, with two-year like-for-like revenue growth of over 44%. This was achieved across a broad range of categories and supported by both DIY and local trade customers, and underpinned by our digital and fulfillment capability. In the second half of the year, core revenue remained strong, albeit moderating to 26.7%, as the tailwinds from DIY customers in lockdown reduced. Local trade customers drove this strong performance, with their pipeline of work remaining very buoyant, and this trend has continued into the current year. Do It For Me revenue was impacted in the first half as our Do It For Me showrooms were closed through to the middle of April, affecting one of our key trading periods for DIFM, our winter sale. Despite these closures, a significant proportion of sales were maintained, supported by our virtual customer journey, which was developed at the tail end of 2020. In the second half, Do It For Me delivered revenue improved relative to the first half, but continued to be impacted by ongoing COVID disruption and notably self-isolation for both our customers and installers, the pingdemic as it was affectionately known. Customers continued to place orders with us in the second half of the year as our proposition and lead times remained compelling and competitive in the market. This resulted in a very strong order book position at the year end, which was more than double that seen at the end of 2019 at over £100 million. We would expect this to at least partially unwind in the current year, benefiting 2022 revenue performance. Now turning to the drivers of profit year on year. This waterfall chart clearly shows the key drivers of profit movement in the year, with very strong core sales and Do It For Me starting to recover. As I flagged at the interim stage, COVID costs largely fell away, marketing investment returned to more normalized levels, and it's worth noting here that our marketing spend remains less than 2.5% of sales, with increasing focus on digital marketing. The strong profit performance has triggered bonus payments across the business. This compares with 2020 with minimal payout and PLC costs stepped up in this our first year following the demerger. Ultimately, this is a very strong financial performance driven by trading and operational excellence, delivering a record level of PBT at 85 million pounds. Moving on to cash. Our year-end cash was £123 million, a reduction from half-year at £204 million and in line with guidance. It is important to note that our normalised profile for cash will generally show a higher position at half-year than full-year, impacted by our trading and working capital cycle. This year we have some unusual factors that have resulted in a more marked reduction in cash in the second half of the year. The first is a significant strengthening of our stock position year on year, where we have recovered stock levels following COVID disruption and have also built additional forward cover to assure availability. These are one-off impacts not expected to recur moving forward. In addition, inflation is also impacting the value of stock holding. Despite these factors, our stock turn remains very strong at 5.1 times, reflecting our curated range and operational agility. Our calendar changed this year to reflect a week 53 cut-off, and whilst this has minimal impact on profit, the impact on cash was around £10 million, which is not expected to reverse until 2023. Capital investment was £26.5 million for the year and second half weighted. Similarly, separation costs accelerated as the year progressed. Taken together with our first dividend payment in the second half, the year end cash position was £123 million, broadly in line with our performer position at Demerger. It is worth noting that for 2022, we will of course have a final dividend payment in the first half of the year declared today. Moving on now to our all important capital structure. As we think about capital structure and capital allocation priorities, I thought it would be useful to have a quick reminder on the structure of our balance sheet. We carry significant lease debt from the leasehold store portfolio of £742 million as at the end of 2021. This will vary over time, impacted by the profile of lease renewals and new list commitments, for example, on new stores. We expect our lease debt to reduce over the next few years, primarily influenced by a low level of lease renewals before increasing from 2026 onwards as the level of lease renewals accelerates. This is illustrated by the chart on the right, which shows the number of lease renewals by year. To give a guide, I would expect a similar reduction in lease debt in full year 2022 as seen in 2021. Given the low level of lease renewals in the short term, with that reduction narrowing through to 2026 as lease renewals accelerate and we start to add new stores. Turning to how we think about capital allocation. We intend to maintain a strong balance sheet. We have reviewed the needs of the business and will target IFRS net debt to EBITDA leverage consistently below 2.75 times whilst maintaining cash on the balance sheet appropriate for working capital purposes. Ordinarily, our business is a cash generative model with a neutral working capital position. As at the end of 2021, we sit just outside our leverage target at 2.8 times. We will invest to drive our growth ahead of the market. This investment will be on opportunities generating high return, and we are increasing our annual capital investment to around £45 million per annum to accelerate and drive growth. David will shortly take you through the key areas of focus for this accelerated investment. Alongside capital investment to drive growth, we have additional investment in the immediate term to conclude our IT separation from Travis Perkins, which is expected to be around £30 million with the majority of remaining investment in 2022. Our dividend policy is confirmed at 40% of adjusted post tax profit. This is an immediate increase from the 30% progressive policy indicated at the merger, a sign of the board's confidence in the business going forward. Against this framework, the board may conclude that it has surplus cash and where this to arise, the preference would be to return this surplus to investors via share buybacks or special dividends. And finally, from me, a few words on the current outlook. In total, trading in the first 11 weeks of 2022 is in line with last year. As we annualise strong 2021 comparatives, core sales are down 6.7% year-on-year and up 26.3% on a two-year basis. We remain particularly encouraged by the pipeline of work currently enjoyed by our local trade customers who underpin this strong performance. Do It For Me has had a positive start to the year, and the order pipeline has continued to build strongly through our winter sale trading period. And of course, we have the healthy backdrop of a brought forward order book of over £100 million, more than double that of a year ago. This will support 2022 performance, giving us confidence that delivered Do It For Me sales will be ahead of 2019, a more typical year, which was reported at just under 400 million. In summary, for 2022, we expect another year of progress, whilst of course being mindful of a challenging geopolitical and macroeconomic backdrop. I look forward to your questions later. In the meantime, I would like to hand back to David who will take you through our strategic update and growth opportunities. Thank you.

Thank you, Julie. I'll now take you through why we believe Wix is a business with exceptional potential and why we're confident in our ability to grow ahead of the market. Our proven growth levers are working well and helping us to consistently outperform. And this is leading us to step up investment where we believe we can drive further growth and strong returns. Specifically, accelerating our store investment program, growing our TradePro membership scheme, exploring new Do It For Me propositions, and investing in our installer teams to convert our large order book. And last but not least, advancing our digital leadership with innovative new digital experiences for our customers. Now let me share with you the strength of the fundamentals that underpin this large market worth £26.5 billion today. We are a property-owning democracy with 65% of the UK's housing stock owner-occupied, the lion's share of which is well over 50 years old, generating an ongoing need for homes to be repaired, maintained and upgraded. just as the age of this housing stock is going up so is the value and as you can see from this chart we're at record levels of housing transactions this underpins the home improvement market in two ways when people move house they tend to seek to improve and in particular invest in larger ticket projects such as a new extension kitchen or bathroom Additionally, people are using the increasing value of their homes to draw down equity and make improvements to their property asset. Alongside this, one of the legacies of the pandemic is that we are spending more time at home and we want our homes and gardens to better reflect the way we're living and working today and this is encouraging people to invest in their living space. So given the significant number of housing transactions over the last couple of years and the change in the way people are using their homes, we expect this to fuel demand for our products and services. The chart on the bottom right shows that older people spend more money on their homes and typically will use tradespeople or installation services to help them with their home improvement projects. This benefits both the local trade and do-it-for-me parts of our business, where we have an older, more affluent customer profile. Looking forward, as the nation faces dramatically increasing energy bills, people will be looking for ways to reduce their costs, whether that's by fitting better insulation or investing in newer technologies such as solar or air source heat pumps. And to that, the government's target to reach net zero by 2050, and the fact that around 40% of the UK's carbon emissions come from the residential sector, there will be an increasingly urgent need to decarbonise the UK's housing stock by making our homes more energy efficient, which presents a tremendous long-term growth opportunity for us, not least given our unique installation capability. Together, we believe these structural drivers point to a market which will continue to grow long term with robust demand in the near term as we are seeing strong local trade order books and our own record Do It For Me order book which will translate into sales this year. So in summary, the cornerstones of this market remain in good health and underpin future growth. And as you can see from this chart, our expectation is this market will grow to 29 billion by 2024-25. 2021 saw a COVID driven step up in growth of 6%. And as I've already mentioned, we outperformed the market twofold with sales at 14. We expect the market growth to moderate to more normal levels around 2.5% to 3% and anticipate that Do It For Me and local trade will be the engines fueling this growth as DIY starts to settle after its COVID heights. We fully expect to continue to outperform the market thanks to our distinctive business model and proven growth levers, which we plan to accelerate with increased investment. So how do we win in this market? What's the source of our sustainable competitive advantage? The answer lies in our highly distinctive business model. We are so much more than just a DIY business. We cover all routes that customers use to get their home improvement projects done. We are there for them, whether they choose to hire local trade, do it themselves, or if they want to use our Do It For Me service, where our team of design consultants and installers are there to help them every step of the way, from concept to completion. At the heart of our business model is our purpose, which is to simply help the nation feel house proud. This is underpinned by our market-leading proposition based on a highly curated range, simple value proposition, served from a low-cost, right-sized estate, and supported by our digital capability and customer service. Together, this ensures we deliver market-leading metrics in terms of price leadership, stock turn, and sales per square foot. This model is highly efficient. It's hard to replicate and offers us the greatest exposure to the fastest growing segments of the market. Do it for me and local trade. This slide will be familiar to you. It outlines the strong portfolio of growth levers that we have to win in the market. I'm gonna simply focus on those where we intend to step up investment and accelerate our growth plans. The first of these being store investment. Our refit program is truly transforming our store environment and enhancing the operational efficiencies of our unique 4C service model. These refits provide ease of shop, showrooms that wonderfully showcase our Do It For Me products and service, increased capacity for home delivery and click and collect, and give customers instant digital access to our fully extended range via our in-store online service. The success of this strategy is evidenced by sales growth from 1.2 billion to over 1.5 billion within the last three years. This is exclusively like-for-like sales, as our overall footprint has reduced during this period. Of our 232 stores, 151 of them are now refitted in the new format, and we're very encouraged by their performance, with average sales uplifts of more than 25%. The average size of our stores is 28,000 square feet and refitted stores deliver higher sales per square foot at £260 compared to heritage stores of £198 per square foot. Refits also consistently achieve a return on capital employed of over 25%. So given the strong and consistent performance of our refitted stores, we intend to go harder and faster with our refit program. And we are planning around 12 to 15 refits per year, up from an average of around seven over recent years, which will mean we will have completed the entire estate over the next five years. I'd now like to turn to our plans to open brand new stores. The successful performance of our model combined with our newly independent status has afforded us the opportunity to look again at our store estate and where we should trade. Switching data from Kantar evidences that we are winning customers from all competitors, taking share and footfall. It's been several years since we've had a comprehensive new store opening program, and we're excited to announce the plans to open 20 new stores and create over 1,000 new jobs. The first of these stores will open early in 2023. White space opportunities include additional stores in large catchments where we are underrepresented, and also smaller towns not currently served by a Wix store. We are confident that these new stores will deliver strong returns and additional scale benefits. And together with our plans to increase the number of refits per year, we expect them to support a growth trajectory that is ahead of the market. The second growth lever we plan to accelerate is our TradePro scheme. It focuses on saving our trade customers both time and money. We make it easy and convenient for them to shop through the TradePro app and our store teams pick, pack and dispatch straight into their vans, all at a 10% discount. TradePro customers are our most strategically valuable customers. They spend 10 times the amount of an average DIY customer. And as you can see from these charts, we are successfully growing our TradePro membership. In 2021, we welcomed a record 80,000 new tradespeople to our scheme, taking our base to just over 630,000. And in the first 10 weeks of this year, we have already added a further 26,000. So momentum is intensifying. The amount they spend is also rising. Sales are up 39% in the last year alone, and they continue to shop more often and increase their average order value. These are also extremely busy people, and our latest research found that 66% of them have work lined up for three months plus, and one in four traders has work lined up for 12 months or more, which means we'll be seeing a lot more of them over the course of 2022. The simplicity and focus of this scheme makes it a real winning format, and the return on investment is highly productive, which is why we'll be increasing our investment in TradePro to secure more signups. We plan to deepen and broaden our relationship with our TradePro members through offering extended services via an app and using our digital expertise and data insight to personalise their TradePro experience, rewarding them for their loyalty. Ultimately, we have an ambition to have one million TradePro members. Many of the enhancements we made as a result of the pandemic continue to feature in our Do It For Me proposition. While our showrooms were closed, our virtual showroom journey enabled us to continue to engage with customers and take them through the design and sales process entirely remotely, supported by our experienced design consultants. Now our showrooms are open again, this service remains very popular with customers. Since we launched it at the end of 2020, there have been over 3.3 million customer interactions with our virtual showroom tour. Our ability to handle the whole process from concept to completion is highly valued by customers and we are seeing high levels of demand for Wix installers to carry out their kitchen or bathroom installation. Likewise, we're also seeing very high levels of demand for these customers to use our installation teams for the tiling and flooring element of their projects too. Our installer base is one of the great strengths of our Do It For Me proposition and our customers greatly value the quality and assurance that our Wix installer teams guarantee. We were delighted to retain our distinctive level of service award from the Institute of Customer Service for our installation quality. Despite the national shortage of installers, we added a further 700 teams to increase our base to over 2,600. This is more than we had before the pandemic, with a trajectory which will see us increase by an additional 25% in 2022. Additionally, we continue to progress our unique installer apprenticeship programme to develop skills for the future in this sector. We've also grown our design consultant population by over 150, taking our design consultant base to well over 600. And record numbers of our design consultants hit the 1 million sales mark, further building the strength of our order book. Our continued focus on product innovation is keeping us on trend, with new products introduced during the last 18 months accounting for over 25% of all sales. On the back of the successful launch of tiling and flooring installations, we continue to test and learn with additional installation service offers. We recently launched internal joinery and are conducting localised tests on landscaping. In addition to adjacent categories, we have identified opportunities over the medium term to deepen and broaden our proposition in the overall kitchen market. In summary, we have confident growth ambitions for our Do It For Me business as we expand our proposition across products, services and distribution to an even wider customer base. Now, before I move on, I'd like to show you our new TV ad, which airs for the first time this evening, so you're the first people to see it. This simply brings to life how we're helping the nation feel house-proud.