Wickes Group plc

Good morning everyone and thank you for joining us here today and also for those of you who are joining by webcast. I'm here with our CFO Mark George and together we would like to take you through the performance of the business for the year ending 31st December 2022 as well as highlighting how our distinctive business model and proven growth levers continue to drive market outperformance and present us with great opportunity in the UK's large home improvement market. In 2022, we celebrated 50 years of Wix operating in the UK. I'm delighted that it was the year we reported our highest ever sales, delivered our greatest market share and also achieved our second highest ever profit at just over 75 million. I'd like to take this opportunity to thank all of my 8,000 colleagues for their incredible work in delivering these results and helping the nation feel truly house proud. Our Digital Trade Pro scheme had a stellar year, with an 18% growth in membership, as our most strategically valuable customer, the local trader, increasingly recognised the inherent benefits of being part of this industry-leading scheme. In our Do It For Me design and installations business, we saw a strong recovery in delivered sales, which benefited from us successfully working through our elevated order book. 2022 has been a challenging cost environment for retailers and at Wix we have taken swift and decisive action to control costs. We've successfully demonstrated the flexibility of our operational model, delivering productivity gains and driving efficiencies to offset increases in our cost base. We are making considerable progress across each of our strategic levers, more of which I'll share later. This, along with our confidence in our business model, leaves us holding our four-year dividend at 10.9 pence in line with guidance. I'd now like to hand over to Mark to take you through the numbers.

Thank you, David, and good morning, everyone. So as David mentioned, 2022 is another very good year for the business with a strong performance. Our sales were up 3.5% on a light-for-light basis and 22.8% up on a three-year basis, particularly strong growth in that three-year period in our core side of the business, as you can see, up 33% over that period. Our margin was 70 basis points lower, and I'll come on to that a bit in a moment. And that delivered a profit of £75.4 million at the adjusted PPT level, which, as David said, a little bit lower than 2021, but the second highest profit we've ever delivered. We continue to have a very strong balance sheet. We ended the year with £100 million of cash. And this balance sheet strength, along with the confidence we have in the business, enables us to maintain the cash dividend at 10.9 pence per share. So just looking at the P&L in a little bit more detail here. Despite the inflationary backdrop and the slightly softer economic environment, profitability in the business has been resilient. The 3.5% like for like sales that I described is on the back of 13% like for like growth the previous year. And that's that continuing effect driven really this year by trade growing very well in our core business and the recovery of the do it for me business post COVID. Inflation has been a big factor. So it's 13% in the year, 15% in the first half, 10% in the second half. And that's starting to decline as further as we get into 2023 and is around 8% at the moment. Now, our margin has been diluted by about 70 basis points. And inflation was a big part of that. We haven't been able to pass through all of the cost inflation into selling inflation on a percentage basis. But also, the growth in our trade pro sales, which are at a 10% discount, is also dilutive. And the two factors coming together has meant a 70 basis points dilution in the margin rate. Our operating costs increased 2.4% in the year, which, given the inflationary environment we're operating in, is a good result and shows that we've got a very tight control on our cost base. More of that in a moment. So overall, that delivered 75 million of PBT, down 11% from last year. And overall, I think that is a resilient performance given a more challenging environment than we were operating in in 2021. So this slide shows the evolution of our like for like growth through the course of 2022 in terms of our core and our do it for me business. So in core, like for like in the first half was negative because we were lapping a trading peak in 2021 through the lockdown period, which was very good for operators like us that were allowed to be open. But I'd like to like to turn positive again in the second half for core as the comparator was more normalized. On a three year basis, as we said, 33% growth versus that pre-COVID level. Now, some of this is inflation, of course, but there is also good volume growth as well in our core business. In Do It For Me, the whole of the year really was about recovery from a much tougher 2021 for our showroom business. And this strong recovery meant that sales on a delivered basis were more or less in line with pre-COVID levels, back about 1% on a light-for-light basis. Now, this was supported in part by the elevated order book, which we're still working through. And we ended the year in 2022 with a lower order book than we had at the end of 2021, but that is still elevated versus pre-COVID levels, and we expect that to give us some benefit in delivered sales in 2023. So you can see that the shape of sales between core and Do It For Me over the course of the year has really had an impact on our profit performance. And the waterfall here shows exactly that. Gross profit has fallen in the core side of the business, with sales falling and a lower margin. Now, some of that has been offset by the growth and recovery in Do It For Me, as you can see on the chart. Not quite fully offsetting, but going some way to offset that drop in core. Cost inflation has been a factor as I described, and you can see here the 14 million of additional costs that we've had through inflation. But actually our cost saving programme, which we continue to operate, has more than offset that in 2022. But importantly, we're continuing to invest in the business. And you can see the bar on the chart here that we have been pushing forward with all of our initiatives and the growth leaders that are continuing to give us good momentum. And we are very confident it will give us good returns, whether that's store refits, new stores, investing in digital, and in programs like our TradePro initiatives. So overall, a good performance in the business, given the economic backdrop. And crucially, we are still investing in the business and delivering good profit. So turning to cost a little bit current and what we should expect in 2023. And we had a version of this chart at our half year results looking at 2022. And we just wanted to update that for you. So you can see on the left the breakdown of our cost base. And as we explained before, about a third of our cost base is what we call fixed in terms of rent rate and depreciation. And we're not really seeing any inflation there. Rents when we're renewing them tend to be on the same levels that we had before. Rates, there's no multiplier effect, as you know, this year announced recently by the government. And actually, the change in rateable value that has recently been announced will mean a small decline in rates year on year for us. And then depreciation, of course, is just a factor of past capex. But then we get into our semi-variable costs. And these are stepping up in terms of inflation for all the reasons that you would expect. So in store wages, which are, of course, a big proportion of that, National minimum wage is close to 10%. And that's a big step up year on year. And we're absorbing that, of course. Distribution costs are slightly higher with wages and fuel. The one cost that really has stepped forward is energy. Now, we have previously announced that we'll be spending 10 million more on utilities in 23 than in 22. It's approximately doubling of our cost base. But as you can see on this chart, utilities is a relatively small component of the cost base. So that's something that we are able to build in. Now, on the right-hand side, what you'll see are the building blocks of what we're planning to do with costs in 2023. We are going to see the inflation that I've described, which overall in the business is about 5% growth. Most of the inflation, other than energy, we will be able to offset with the productivity plans that we have again this year. And we've given some examples here of what we're doing. So we're consolidating our distribution centre network and actually closing one that we had open temporarily during COVID. We've outsourced some of our logistics and warehousing for our kitchens and bathrooms business, and that will save us some money. And we're looking at ways through technology and improved processes to improve the efficiency of operating our stores. Lots of initiatives that are going to drive out cost through the year. But what will be different and incremental year on year, therefore, will be the 10 million in energy costs and then about 5 million of incremental investment in our growth initiatives. So just turning now to cash and the balance sheet. So we continue to operate with a very strong balance sheet and we ended the year with 99.5 million of cash. Our operational cash flows have been strong once again and that's enabled us to increase both our capex and our dividends. Now, our year-end cash balance is lower, as you can see on the chart here, and really for two reasons. The first is that we had around 25 million of IT separation costs as we get towards the end of the project of separating our systems from Travis Perkins. Now, they are non-recurring. We'll just have 5 million more in 2023, and then that will be behind us. And that project is on time to be completed in April this year. There was also a working capital outflow of £28.7 million. Two key factors in there. The first is that we had stock inflation. We actually had a small decline in the volume of stock that we're holding, but around a 10% increase in the value due to inflation. And then the deferred income associated with our Do It For Me order book for kitchens and bathrooms is lower simply because the order book is lower year on year. We anticipate that working capital will be more neutral in 2023. So the table on this slide shows our leverage and importantly, including leases here. And on that basis, lease adjusted, we ended the year with a net debt EBITDA leverage at 2.9 times. So with net cash at £100 million, we're in a very strong position to continue investing in our business when others might be looking to scale back. And this gives us an opportunity to take further market share in the coming years. So I'd like to finish with some comments on our current trading and outlook for the year and guidance. So far in 2023, trading has been in line with our expectations. Core is slightly behind on a year-on-year basis. Within that, trade continues to grow and DIY continues to normalise off the peaks of COVID. In the do it for me side of the business, our delivered sales is actually slightly up year on year. We had a good period of ordered sales in November, December 2022, and then we're now delivering that in the first few weeks of 2023. So we're actually slightly ahead year on year for those early weeks of the year on delivered basis. And then on an ordered basis, as we went through our important winter sale period, we're broadly in line with where we were in 2022, which I think is a good result given the economic environment that we're operating in. We're continuing to see good results from our growth levers. So sales uplifts from refits and the return on capital associated with that continue to be encouraging and give us confidence that we can get results in the future that are similar and that will continue to grow our market share. As I mentioned, we've got a strong productivity plan to offset all of the inflation in the year other than energy. So finally, I just wanted to touch on capital allocation. We will soon be coming up for two years as an independent public company, operating our own balance sheet under our own control, separated from Travis Perkins. We're soon to complete the IT separation, which has obviously been a major project and a significant cost. We've also come through an extraordinary period of trading and volatility, with some highs and lows in different parts of our business. And working capital, of course, has been affected through that. So we think now coming through all of those periods, now is the right time to have another look at our capital allocation policy and consider what will be the right leverage targets, policy on dividends and use of any excess cash. So we are reviewing the policy and we plan to update the market at our Q2 trading update in July. With that, I'll hand back to David.

Thank you, Mark. Now, many of you are familiar with this chart, and I absolutely make no apology for sharing it again. We have a clear, distinctive, and consistent strategy with proven growth levers. Over the next couple of slides, I'll share data that demonstrates the extent to which the levers are working, and we believe there's plenty of headroom for further growth. I've already mentioned our Digital Trade Pro scheme, which continues to experience accelerating growth in membership. They are our most valuable customers, spending 10 times more in a year than a typical DIY customer. And the great thing is that when we recruit a new customer to the scheme, within 12 weeks they are already spending like an existing Trade Pro customer, helping to drive sales growth of almost 20% last year. We are actively recruiting, developing and nurturing this customer base who are attracted by our simple proposition that critically saves them time and money. Our research tells us that they are increasingly conscious of rising material costs and are switching to us for our strong value credentials, trusted own brand and the simple 10% discount scheme across the store. What's more, the fact that they can buy everything they need on the app and our teams will pick, pack and have it ready for collection in a 30 minute window is a tremendous draw. As well as focusing on growing trade customers, we're doing a great job of expanding our DIY customer base. This chart demonstrates how our leading digital offer has helped us to broaden our brand appeal to younger customers and more women. This wave of new DIYs was initially fuelled by the pandemic. However, we have successfully sought to retain and grow this customer base through targeted marketing and social media campaigns. Female customers now make up 22% of the Wix customer base. And by the way, they typically spend 35% more than a male DIYer. And as you can see here, our fastest growing customer base are younger people aged between 18 and 35. This time last year I announced that we would be ramping up our store refit programme and in the past five years we have converted over 160 stores to the new format which is over 70% of the estate. And we consistently see a step change in sales and return on capital employed of around 25% in these newly refitted stores. And finally to the last chart on this slide. Through the lens of two key digital shopping journeys, Click and Collect and our home delivery channel, we are delivering record levels of customer satisfaction. These are the two service touch points where customers have the highest service expectations. not least when you turn up to a customer's door and step over the threshold of their home. And as you can see, 2022 has been a record year across both measures with incredibly strong top box, excellent scores. And if you were to include good ratings as well, these scores would be in the 90s. And as a retailer, I can tell you these are very, very impressive. But here you can see the results of these efforts. Our digitally-led, service-enabled model has helped to produce a dramatic increase in sales densities, with customers visiting more often, whether that's online or in store. And when they visit, they are buying more, with items per basket up 9%, despite the impact of inflation. This has translated into significant and consistent market share gains over the past four years. And it's worth pointing out that for us, this is exclusively like-for-like sales as we have fewer stores than in 2019 compared to the overall store number growth in the market. Having demonstrated the extent to which our growth levers have driven out performance and market share, I'd just like to share a few of the key initiatives that we rolled out in the year that helped generate those results. I've already mentioned the acceleration of our store refit program, and this will continue at pace in 2023. Within our existing stores, we continue to invest enhancing our service model. We have increased the square footage of fulfillment space in a further 28 stores, giving us the capacity to fulfill 5,000 more digital customer orders per week. And it's worth noting that home deliveries have the highest sales attached to them. This additional space combined with enhanced in-store technology has also facilitated the launch of a new 30-minute click and collect window. In peak trading, we are picking up to 16,000 items per hour for our customers. We were delighted to open our first new store in three years in Bolton last October, which has had a great winter season to kick off the year. And we have plans to open around 20 new stores in the next five years, with the team getting ready to open our new Chelmsford store next. and we have with with a 50-year heritage the wix own brand is one of our greatest assets trusted by trade and di wires alike it accounts for around two-thirds of our sales in 2022 we continue to strengthen our wix own brand and value proposition through a number of range reviews and in recent weeks and in the face of the energy crisis we've launched an exclusively own brand range of led lighting which is proving incredibly popular We've also introduced an entirely new Wix branded range of garden power tools such as lawn mowers, hedge trimmers and blow vacs in readiness for the spring season. Towards the end of the fourth quarter we saw particularly strong demand for energy saving products as customers sought to find ways to reduce their energy consumption in the wake of rapidly rising energy bills. Products such as insulation, drafting excluders and heating controls saw double and in some cases triple digit percentage growth during some weeks as the cold weather took hold. We've made it easier for customers to access these products with the launch of our sustainable house guide on our website with advice on sustainable living and energy reduction for all rooms in the house with a click to purchase option for the most important products. This is the only transactable guide that exists for customers in the market. We are making great progress building our digital capability. Key to broadening our appeal to a younger audience and more women, like influencer Kimberly Walsh shown here, is using digital content to make the brand more accessible and easy to shop. eBay is a highly effective marketing tool for reaching younger millennials, and our Wix eBay store now has 4,000 product lines. And we're the only business to offer click and collect service on the eBay platform. We also recently introduced Klarna as a flexible payment option and again this is skewed towards engaging younger people. We are seeing good results from our machine learning platform, our missions motivation engine. We are now employing this across all three customer propositions and seeing really meaningful and measurable results. When we communicate with customers using data-led foresight for the shopping mission they are on, it is generating identifiable revenue gains. And we're particularly delighted that our innovation in this space has been recognised by a number of prestigious industry awards, including winning Marketing Week's coveted Grand Prix award this year. 2022 has been a great year of progress for our Do It For Me growth lever. We achieved our goal of 3,000 installer teams by the end of the year with 400 new teams coming on board. This ensures we continue to offer the best available lead times in the market whilst retaining a flexible approach to capacity. The quality of our installation services is resulting in more customers choosing to have their kitchen or bathroom fitted by a Wix installer. More than one in two customers now use us to install their project and this has been growing steadily year on year. We're also seeing the shape of our Do It For Me order book changing as we strategically extend our Do It For Me proposition into other services. We continue to see encouraging attachment rates for tiling, flooring and joinery projects, confirming the opportunity to increase the overall project spend within the home. And we've delivered some great innovation in our kitchens business. We have totally repositioned, rebranded our more affordable ready-to-fit proposition as Wix Lifestyle Kitchens. And along with introducing eight beautiful new ranges here, we are now offering a virtual design service so customers can get help from a Wix design consultant to create their dream kitchen at a lower price point. And I'd just like to share a quick video to bring these kitchens to life and show you how great they look. Thank you. Super. Quite a natty track that, wasn't it? Right. We've made tremendous progress across our responsible business strategy. And I'll just call out a few highlights. Wix is fast becoming one of the UK's leading businesses when it comes to inclusion and diversity. Just last month, we were recognised as the number one UK retailer in the Stonewall Workplace Equality Index, achieving their gold award. In the environment pillar at the end of last year, we launched our near-term science-based targets, demonstrating our commitment to achieving net zero emissions by 2040. And within our homes pillar, I've already touched on our new interactive sustainable house guide for customers. And at Wix, our purpose is to simply help the nation feel house proud. And we want to help customers feel proud of their homes, saving energy and protecting the environment. I think this is a real future growth opportunity that we plan to seize with both hands. Finally, before I close, I thought I'd share with you the trends we're currently seeing in the market. As you are aware, we keep a close eye on current consumer trends through our monthly Mood of the Nation survey, and we also conduct a larger piece of research every six months, which we call our Barometer Study. Our local trade customers tell us they continue to be busy with healthy pipelines of work. 45% say they have work lined up over the next three months, albeit this is slightly softer year on year, but between 20% and 25% of them are still telling us they're booked up for the full year. Perhaps not surprisingly, they're also telling us they've seen an increase in jobs to install energy saving solutions in their customer homes. In Do It For Me, as previously mentioned, delivered sales have broadly recovered towards the levels we enjoyed in 2019 before the pandemic severely disrupted this part of our business. Order trends have been improving since Q3 last year, and our winter sale that we launched this January has performed as well as 2022. So there's some robustness there. What we are seeing though is much stronger conversion in a tightening market within Do It For Me. So whilst lead volumes are understandably slightly lower, those people who are on the customer journey, who for us tend to be more affluent homeowners, are serious about buying a new kitchen or bathroom and therefore conversion and average order value has been higher. In DIY, we continue to see that making home improvements remains high on people's agendas despite the cost of living challenges. 28% of people research told us that investing in their home is their top priority over and above going on holiday or spending on leisure time. However, they are looking to save money on their home improvement projects either by shopping around to get good deals or swapping to cheaper retailers. Both of which work in our favour as people turn to our Wix own brand for great value, quality products they can trust. Our research does show though there is a slight increase in terms of jobs being postponed or cancelled. So to conclude, 2022 has been another year of good performance and progress. The combination of our business model and growth levers has driven an increase in sales and market share despite the challenging environment. As Mark has outlined, 2023 has started with performance in line with our expectations. We have a strong productivity plan in place to mitigate cost-based inflation. In times of economic uncertainty, I firmly believe that strong businesses get stronger and we are one of those. We are confident that our distinctive proposition, unique service model and continued investment in our proven growth levers will continue to drive sustained market share gains. Thank you for listening. Mike and I, Mark and I, sorry, Mike, you're Mark this week, aren't you? Good gosh. We'd now be happy to take any questions.

Morning. It's Kate Calvert from Investec. Just two questions for me. The first one is, given you continue to drive much higher sales densities, do you have any thoughts on what a sustainable recovered margin is or what sort of underlying margin is when the market starts to look a little bit more positive? And my second question is just on the 5 million of investment costs increase. Are there any specific projects within that? Thank you.

Mark, do you want to start on that?

Yes. So in terms of margin, you're talking at the gross margin level here more or net margin? Both. OK. So I think this year we would expect that the gross margin picture year on year would be much flatter than it was in 2020. to the dilutionary effects that we had will still get some drag from an improving trade pro participation But the the effect of inflation I think will be much less of an issue and we'll be able to pass through the inflation in in cogs into Into the selling price as well So I think much much better in terms of year on year for gross margin. And in terms of where that goes to in the future, I think it's hard to give a number. We certainly don't want to give guidance, but certainly the year ahead, I think flatter rather than a dilution similar to last year's 70 basis points. And then at the net operating margin, as your forecasts are indicating, that 2023 will be a lower profit, and we would expect that too, but to rebuild from that point. And we believe that we can grow from that point ourselves, but importantly, grow our operating profit faster and improve margin, and certainly back towards the levels we had in 2019 in due course. And then beyond that, we'll have to see. The 5 million investments, there's no one big investment within that. It's a series of things. So as we do store refits, we have costs like re-merchandising the store. We have some extra wage costs. We have some marketing costs, things like that, which go through the P&L rather than CapEx. Similarly, when we open a new store. And then investments in IT and digital as well. So it's a combination of all of those things rather than any one particular investment.

Thanks, this is Adam Cochrane, Deutsche Bank. A couple of questions, please. Have you had any thoughts on a smaller store format? We're hearing from a number of people in the industry that a more localized, smaller offer, particularly as you go towards the trade consumer, may be helpful for them. On that, do you offer any or any plans to offer delivery to site for the trade consumer? In terms of, secondly, the promotional environment, you talked about maybe customers are increasingly trading, either trading down or shopping around, whatever the phrase you used was. How do you see that? evolving right now within your current trading comments or elsewhere? Have you seen an increase in promotion? And then finally, third question, you talked about a couple of new stores. Would you just be able to give us a sort of guide as to how many, what the store pipeline looks like for 23 and 24 if possible? Thanks.

Thank you, Adam. I'll take most of those, Mark, and then you can pile in. So in terms of the first question, smaller store format, it's probably worth reminding ourselves that when we look across our broader competitor set, the kiosks aside, we already have quite a perfectly formed store. that's sort of like 20 to 25 000 sort of like square feet and that's sort of like the brief for our new stores as well it's much more about that 20 to 25 000 square feet and as you know it's a super efficient box because although two-thirds of our sales come from our digital channels 98 of that fulfillment comes from the physical store which means actually we get to everybody's homes in the local neighborhood anyway because we can deliver and fulfill from store So you don't necessarily need to be on the high street because we can get to the locations of those people in their local communities because we have that uniqueness in our business model. And of course, for the trade customer, there are two things. One, I think we're super convenient because they can order on the app and we will pick, pack, and put it into the back of their van within 30 minutes now. and the nature of the stuff that our trade customer buys as you know is very much heavy side our number one selling line is a sticker cls and number two is a bag of plaster sort of thing so we're moving heavy stuff in fast speeds and getting into the back of their van so i think for that customer we've got a really convenient digital great service-led solution and i think our store size is uh is is absolutely appropriate right right now Of course, it's never to say never, Adam, when you think about future view. But at the moment, I think we've got a really optimized format. And that's the format that we will continue to build out because of our digital strength and our service capability to deliver to people's homes. We already do deliver to site, by the way. We can deliver to site for the trade customers. We can do that. Promotional environment, I mean, it's hard to call where things may go over time across the course of the year. I mean, we are a very, as you know, our range is a highly curated range. We only hold about 9,000 SKUs in store. Our top 150 lines make up 35% of our sales every week. So just making sure the sharpest price in town on the lines that matter most, almost through an EDLP model, is what works for our business. And then we do have some promotions around that, but we are not a promotionally intense business, not least because two-thirds of our business is own brand. So it's already at market-leading value and phenomenal quality, and we've built that brand over the last 50 years. In terms of new stores and sort of like the profile of that, we're sort of like suggesting 20 stores over the coming five years. And I think if you took an average, you know, four stores a year sort of like pacing, 2023 will probably be around that, I think it's fair to say, isn't it, Mark? I mean, things do move around, but broadly we will pace across the course of the period with those sort of numbers. Thank you, Adam.

Thanks. Amigala from Citi. Just a couple from me. First one was in Do It For Me. If you could give us some numbers in terms of the attachment rates on flooring and tiling that you're seeing. On the stores, in terms of the sort of different propositions, service propositions that you offer on installation, is there a package for, say, energy refurb for a consumer, for a household who's just looking to look lift up their EPC from, say, D to C? Is there a consolidated offer that you currently offer, give across your stores, and is there a plan for rolling out something like that in the future? The second one was really on refits. What's the sort of maturity curve? Does it, do we kind of, the sales uplift that you talk about, does that materialize on a 12-month view, or is it longer? And the last one is, in terms of the product portfolio that you currently have, do you see any gaps in the current proposition? Are there plans to roll out, to extend the sort of current ranges? Even from a brand perspective, is there a plan to add more brands going forward? Thanks.

I'll take one. You can do two and three, and then I'll do four.

OK, good. I can give you a sense of order of attachment rate rather than the absolute numbers. What I will say in the round, when we actually look at the installation, per se of a kitchen or bathroom, we've got now more than one in two of our kitchen and bathroom sales go along with the installation service. And that has been steadily growing each year. And of course, we've built our installation capability now to 3,000 teams to make sure that we can match that for capacity as the consumer demand follows through. It probably won't come as a surprise when we look at some of the individual installation services we provide. Tiling with a bathroom has a very high attachment rate. Of course, it does. It's a complex thing. So that has quite a high one. Flooring, likewise, in a bathroom. And then flooring in the kitchen, maybe a little lower. and joinery is very much on the increase but these things do blend and what we see is sometimes if someone's looking for a more open plan kitchen and we're going to lay the floor they might want us to lay into the hallway or other rooms in the house sort of thing so flooring is really intriguing because it gets you to more rooms in the home when you actually have that installation capability but very much tiling would be at the top flooring joinery is another good example you know very much in growth because People change one door in the bathroom and they look around and they go, well, I think the other three doors upstairs probably need replacing as well. So it's another way of us penetrating more opportunity in the home.

I don't know if you want to talk about energy and refurb.

Yeah, so we have a range of products from loft insulation roll and the ancillary products that go with that, LED lighting, draft exclusion, all of those kind of things. It's quite difficult to put those into bundles because every home is different. So we try and help our customers understand what would work for them. So if you go to the aisle and you can see a guide, if you've got a three bedroom semi-detached house, you'll need this in terms of a package for loft insulation. If you've got a detached house, you would need this. So it's really about giving them the information to enable them to create their own bundle from the range. It's quite hard to make those bundles work. And then the range of what we offer, we're always looking to improve that. And as David said, we have launched our own brand of LED lighting, which is going extremely well. So we're just constantly looking to see how we can improve that rather than put it into specific bundles.

I think, I mean, my build on that, Mark, would be... As we know, there's a lot of conversation that sits out there about air source heat pumps and solar panels and everything else. But when we get down to brass tacks, more than 50% of our housing estate in the UK is D and below in terms of its EPC rating. And the best thing we can all do is just insulate our lofts. So just getting some insulation in the loft in the first instance is the right thing to do. We do actually bring that project to life for customers, to Mark's point. But that's something very much that the trades tend to do. That's probably not a design and installation service, because there's little design required there. Very much more for the trade. So typically during the winter season, when you walk into our store, there will be loft roll, loft ladders, loft board, and loft legs, and loft lighting all put together, all curated in one offer. So it's really obvious what the project is. And the reason I say that, because as a retailer, we don't think product. We think project. People are not buying products, they're buying projects. There's something they want to do with their homes. So how we curate that together and make it really easy for the customer to understand and buy is what we do do. I think over time, and this is something probably not to rush into, because your question was, can you come in and survey my house and basically do everything, David? I'd love you to do that. And that might be somewhere where we head at the moment, but we're just being really thoughtful and strategic as to where we move and how fast we move in some of those other areas, because I just think there's an incredible opportunity in getting the basics right in the first instance in the house and how we can help more of those homes become better insulated in the first instance. But we'll come back over time with our thoughts and actions in those areas.

Should I cover refits maturity?

So the refits, actually, we see that upside impact very, very quickly, certainly within 12 months and normally pretty immediate. As you know, when we upgrade a store with the new format, we tend to see about a 10% uplift in the core side of our business and then a 50% to 60% uplift in showroom. And that's pretty immediate. People know that there is a Wix store there. And so they're familiar with that. But actually getting the word of mouth about the new showroom, that happens pretty quickly. So certainly within 12 months, we see the uplift coming. And then it's sustained. We measure that against a control group of stores that haven't been refitted. And we see that that level being maintained.

And then, sorry, I only had a fourth. It was a whole fire. Which is the product portfolio piece. Now, as you know, our model is one of curation. And it's a really critical discipline for us as a business, because it sort of fuels the efficiency of what we do as an organization. So we'll always make sure that our ranges are highly curated. We'll always make sure that innovation is the heart of our brand as well, because it's a cornerstone of our business. But there will be areas that we can still consider and should move into. As a customer, we serve a very general local trader. And I'm curious as to what we might want to do with some of our products and our ranges for the more specialist plumber or the more specialist electrician. So we'll probably see more thoughts and actions in those areas. But in the round, I think we've got a really, really strong offer. It covers all of the core categories in a really compelling way and provides phenomenal value.

Morning, Sam Cullen from Peelhunt. I've got three also. The first one is on trade pro and the discount. Is 10% the right level given people like Toolstation offering a 5% discount for trade customers and would argue that their prices are slightly lower on some core items also. If you thought about is trade credit important for your customers given they offer that. The second is on energy costs and the uplift this year. If current gas and electric prices persist for the next six, nine months, what does the energy bill for 2024 look like? And then the last one, just on some areas, seeing deflation, I think timber... CLS probably peaked at five quid. It's at 3.25 when I looked at the website yesterday. Can you hold on? Is timber deflation more than that? Are you holding on to a bit of gross margin there in some categories?

I think TradePro discount at 10% is the right level for sure. It's certainly easier for a trader to see something at £4 on a shelf and work out what 10% of it is rather than 5. That definitely works in their favour, which is why we only ever use 0s and 5s on the end of our product prices. And look, it's working, isn't it? We've grown our trade by base by 18%, 19% again this year to over 750,000. So the simplicity, the attractiveness, the digital and service proposition combined with that 10% is working, Sam. And look, once you've given in life, it's very hard to take back, isn't it? So I think this is the right thing to do. It's working for us. It's easy for us to navigate. And as I said previously, if you look through the lens of cash, the strategic value of these customers are 10 times out of an average DIY. So I think we've got the right flywheel effect here and the right proposition for the business.

Pick up on energy.

Yes, so energy, the 10 million increase that we've flagged for 2023 is really about a nine month impact because the contract that we are on currently runs out at the end of March of this year. So we've got three months at the lower rate, nine months at the higher rate. And so if you were to annualise that, then you would expect 2024, all other things being equal to be a little bit more uh than 2023 however for the reasons you explained sam because wholesale prices are coming down and we haven't yet locked in much of 2024 there is an opportunity i think those two factors together probably means year on you'll be broadly flat rather than a decrease it's just because that 10 million is only really associated with nine months

And then to the deflation point, as Mark mentioned in his presentation, yes, we can see inflation starting to moderate as we come into this year. It's sort of like higher single digits, and it's starting to cool from there. But our enduring tenet or cornerstone of our proposition is being best value. So as things do come down, we'll make sure that we are the best value in the marketplace on those lines that matter most. That's how we would view that.

And in terms of impact on margin, we don't tend to operate with sort of any one particular line. or individual product. It's, you know, the commercial team are juggling a range of things. And as I said, we expect the margin picture to be much flatter year on year in 23 versus 22 than it was across the period of 22.

Thanks. Shane Carberry from Good Body. Two if I may, please. Firstly, just on the competitive backdrop in the kitchens and bathrooms market, probably feels like some competitors are kind of pushing a little bit harder maybe to get involved here. So just any evolution that you've seen in the competitive backdrop there would be helpful. And then secondly, in terms of CapEx, again, some peers, I suppose, have been kind of slowing rollouts, et cetera. And your CapEx guidance, I guess, is broadly flat year on year. So how have you guys been thinking about that?

Do you want to do the first and I do the second?

Yeah, I can do the first. It's interesting when we think about our do it for me proposition, because the one thing we're not, when we think about most of our competitors, is we're not a category company. You know, Wren only do kitchens sort of thing. You know, Everest only do windows. Whereas we're a business that will design and install kitchens, bathrooms, home office. We'll take on other installation services. So, you know, we don't look at any one competitor because the suite of what we do is very different and very unique in the marketplace in terms of our capability. The one thing we are thinking about, specifically in the kitchen market though, is we recognise that under classic sort of like good, better, best tiering, we tend to operate in the better and best at the moment. You know, the average sales price of a kitchen through our showroom business is twice that of the average in the market. And that is a reflection that we have an older, more affluent customer base in terms of shopping with us. The whole lifestyle, Wix lifestyle kitchens that you saw earlier, is a very genuine and focused step into what we call the volume market, so the £4,000 and below sort of thing. So, you know, we're innovating into the volume market. We think it's the right thing to do. You know, Kitchens is a really stronghold for us and we think we can build out and actually cover good, better and best in a more compelling and complete way as an organisation. So, you know, we've got some real confidence in that proposition and think it will prove quite sticky with customers actually.

Yeah, and on the CapEx, Shane, the great thing about what we're investing in is it's really sort of proven drivers of growth in our store refits, in our new store program, digital and our various initiatives. And so we're very confident that we'll get the levels of returns that we have had in the past from the investments that we're making this year. And because we've got a strong balance sheet, we're absolutely in a position to do that. And we think that if anything, it will help us grow market share faster because others, as you say, are having to slow down. Now, we are obviously managing that carefully. So if we were to see a more extreme downturn, we are able to be flexible with the pace of that CapEx investment. There's no one investment that is an enormous investment that once it's made, you can't go back on it. Each refit is sort of just over a million pounds. Each new store is sort of one and a half to two million. And tech capex that we're doing is more incremental project by project rather than one enormous system. So we can speed that up and slow it down. And if the environment requires it, we can do that.

Oh, Tony's got the mic.

You're out, you're out. Yeah, Tony Charette, Panmure. Just a couple. TradePro, can you just give us your view of numbers going forward? You know, you're still happy with 10K a month and... uh is it getting more difficult to to recruit people to it um first question and secondly uh you referred to some sort of measurable benefits from mme i just wonder if you could just tell us what they are or just give us a few examples of those just it's not that i don't believe you i just i thought we built a relationship founded on trust only

I think it's a super question on TradePro actually, because we have been accelerating in terms of our growth in the membership base quite significantly over the last two to three years. Our ambition remains a million TradePro customers on the scheme. We're just over 750, or probably a bit higher now because of the rate, as Tony quite correctly calls out, about 10,000 a month. Although I would anticipate, and we do, that there will be a curve that starts to slow as we come through to hitting that million sort of thing. So there will be some slowing of that growth rate. I think it's fair to anticipate that. It would be naive of us to think that we can continue to keep stepping it up. But we will get to that million mark. Absolutely. I think that's a clear and appropriate ambition for the scheme. You won't like the response to your second question, because our machine learning we see as quite proprietary, widely recognised in the industry as something quite innovative. picking up awards all over the place sort of thing. So I'm slightly loathe to talk to the specific details of what's happening. But what I hope you can be encouraged by, that it genuinely is quite meaningful, which is why we've now rolled it out across all three propositions. So we are seeing great engagement from customers from this. And we are seeing higher sales as a consequence of those customers who are experiencing the machine learning communication engagement that we are doing. But we're not publicly revealing those numbers at the moment, I think it's fair to say.

But we're measuring that by the strategy of communications that we have. We always hold back communications and do it differently and have a control group, and then we can actually measure the impact of what the machine learning is doing.

It's good stuff. Thanks. Adam Thompson from Liberum. Three questions from me, please. Just that final slide you gave in terms of underlying market activity. It looks like the trade pipeline for tradesmen is still decent. Have you got any insight there into the size of projects that tradesmen are undertaking, just to give a sense of underlying market activity there? And the second question is just on your outperformance versus competitors, really. We've seen some of your major peers report recently you're continuing to outperform. Just a reminder on the two or three really key points that you think are driving that. And are you seeing competitors stepping up their game in any particular area to try and close the gap? And the third question is just on store refits. So any, well, a reminder, first of all, just in terms of the new stores that are opening, the key difference in terms of the format and the layout versus some of the old legacy stores, and any new learnings in terms of refits and new formats that give you confidence you can roll those out in the existing estate as well to bring some benefits to you there. Thanks.

Super. There was a lot in there, wasn't there, Adam? Anything I missed, Mark, please backfill. In terms of trade, the nature of our local trade customer is very much a general builder and general home maintenance. So there's a velocity of projects, probably more than there is a scale of some of those. So we're not really into the house building territory. Probably small extensions, definitely. But it is much more about general maintenance around the home, knocking walls out, putting new walls in, kitchens, bathrooms. Remodelling within the home, I think, is probably a better descriptor of the nature of the trade that our guys do. So I don't have any real detail right now in terms of the project costs attached to those. How are we outperforming? I think, as I talk and I sort of reiterate, I think there's a uniqueness in the balance of our business. The fact that we are local trade, DIY, as well as this design and installation business. I think there's an inherent strength in terms of our digital capability and the flexibility of our business and just our service model. You know, the fact that we can deliver to any home or we've got a large, we can collect business, you know, we can pick, pack and dispatch in 30 minutes for traders to either their van or to sites. So it's a really simple model with value at the heart of it and a really strong own brand at the heart of it. And that's really important, I think, to reflect on because it's taken us half a century to build that brand. So whilst many others are, interestingly, in the competitive set trying to build out an own brand proposition, we have had half a century of building a really credible own brand with the toughest audience against which you're building that, which is a local trader. Because the quality of the product you sell reflects in the quality of the work they do. So you can't get better testament than having sort of like, you know, 60 plus percent of your business be an own brand when your most strategically valuable customer is a trader. So I think we're really, really well placed. And I think it's a really distinctive point of difference as well for business, of course, provides provides great value. New store refits. I think we've now really got the blueprint to a sharper position as we could get it. And probably the final bit of sharpness, as I touched on earlier in the presentation, is on some of those stores that we've refitted, we have gone back and retrofit their capability and capacity to be more efficient on home fulfillment and click and collect. And that simply means joining the back door of the store with the front door in a way that no customer gets to see. But we can move products around from back to front very, very swiftly. And we also, as I say, have a mini Amazon out the back of all of those stores. So our top 30 to 40 selling home delivery lines are merchandise behind the wall. So no customer gets to see them. But we pick, pack, and dispatch at speed. So we've been retrofitting some stores to take that capability on board. And that feeds into the new blueprints as we go forward but it is it's a 20 to 25 000 square foot store with our 4c uh you know service model operating very very well uh uh within that so i don't see any real change at the moment to to to to that proposition And that probably is the key learning. It's how we've uncapped the capacity to really lean into that fulfillment opportunity of home delivery and click and collect in a way that we probably didn't have in earlier blueprints of the new format store. But we've really got that running very, very well now.

We've got no questions from the today, so over to you for closing remarks.

Super. Well, look, thank you, everyone, for coming for a very early start this morning at 8.30. I really do appreciate that. You know, I mean, look, to conclude... I mean, I'll finish really where I started, which is it's been another great year of progress for the business. And it is that combination of our business model and our growth levers that are continuing to see us take market share and deliver in line with the expectations that we've set for the business. As Mark said, it's been a good start to the year. It's in line with our expectations. We've got this strong programme of productivity in place. And I really, really believe that in times like this, strong businesses do get stronger, which is why we're still committed to investing in those growth levers that we know with certainty will deliver returns that we've been seeing to date. So thank you for listening from Mark, stroke Mike and I. Have a wonderful rest of your morning.