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.