Wickes Group plc

And thank you for taking the time to join us this morning. And I'd also like to welcome everyone who is watching via the webcast. I'm here with our CFO, Mark George, and we are delighted to share with you our results for the six months to the end of June. We'll spend the next 20 minutes or so taking you through the performance of the business, as well as highlighting the great progress we are making on executing our strategic plans. I'm pleased to report we've had a positive first half sales performance within what continues to be a challenging market. This demonstrates that our strategy continues to deliver. Our uniquely balanced business model, which faces into all three routes to home improvement projects, has seen strong performance in local trade and do it for me, compensating for a DIY market that is normalising post COVID. We continue to grow our digital trade pro scheme with 17% growth in membership year on year and Do It For Me delivered sales up 5.8% with orders still in growth. We have delivered profits in the half as expected and we are on track with the productivity and efficiency plans that we shared with you at our prelims in March. Back in July, we announced new capital allocation policy, part of which was a share buyback programme, which is now very much underway. Overall, it's been a positive first half as we continue to successfully execute our plans and remain confident in delivering the full year in line with expectations. I'll now hand over to Mark, who will take you through the numbers in a little more detail.

Thank you, David, and good morning, everybody. So, as David mentioned, it's been a good start to the year. Revenue has been up 0.7% on a like-for-like basis in a tough market, with core sales broadly flat and do-it-for-me sales up 5.8%. Margin is 30 basis points higher, and I'll unpack that a little bit more in one of the later slides. With tight cost control, we've been able to deliver £34.8 million of adjusted PBT on a pre-SAS basis. Now, that's lower than last year, but very much in line with our expectations. And we continue to have a strong balance sheet, £190 million of cash at the year end, sorry, at the half-year point. Obviously, with our seasonal working capital flows that you're familiar with, that is the high point for us and will be lower at the year-end and we'll come on to that in a moment, but a really strong level of cash. It's that strong balance sheet plus the confidence that we have in the business model that enabled us to update on our capital allocation policy in July. To reiterate two components of that, one is that we're going to continue maintaining the 10.9 pence four-year dividend for 2023. And the second, that we've started the £25 million share buyback that we discussed in that update in July. So as part of that four-year dividend, we're declaring today an interim dividend of 3.6 pence per share. So profitability has been resilient. Let's just go through the P&L in a little bit of detail here. So despite the inflationary backdrop and softer market conditions, we've really delivered in line with our expectations. So starting at the top, like for like of 0.7%. We've got a bit of a breakdown on the next slide, so I'll come to that in a moment. Now, gross profit was 30 basis points up year on year for the first half. And the two offsetting factors here. First of all, distribution costs, which we include in our gross profit definition, were lower. And that's really helped the margin year on year. A couple of components within that. Productivity savings, where we've taken capacity out of our network as volume has fallen. We've really driven through productivity benefits, which has been excellent and was in the plan from the beginning of the year. Second of all, we've changed the mix slightly towards more customers coming for click and collect rather than home delivery. By improving our offer, making a 30-minute click and collect now with record levels of customer satisfaction, that actually helps our cost to serve because it's cheaper for us to do click and collect than it is home delivery with the extra charges. So that's really improved our distribution costs. Slightly offsetting that, the actual product margin of what we're buying and selling is slightly diluted in the first half. And the main driver of this is that we've got a higher proportion of trade pro mix, which of course is at a 10% discount. But overall, that's 30 basis points up year on year in the first half. We're expecting actually for the year as a whole for that to be broadly flat. So outside of distribution costs, we have seen quite a lot of inflation in other costs, particularly wages and energy. And we'll come on to that a little bit more in a moment. But that put together gives us our 34.8 million pre-SAS adjusted profit before tax, down 15.7% on H1 last year. Now, post SaaS, that number is 31.1 million. And I'll come on to explain SaaS again in a moment. And for this year, we're gonna quote both of those profit numbers. And then from next year onwards, it will just be the post SaaS version. So overall, very resilient performance in profit and very much in line with our expectations. So moving now to sales and the like for like trends. If we can move to the next slide, please. You can see here the breakdown of our sales in the first half between core and do it for me. So within core, light for light was slightly negative. As you can see here, we had trade pro sales growing double digit and DIY remaining in decline, but on an improving trend. So as you can see on the table on the right, if you look at core, the inflation volume mix is really changing between Q1 and Q2. So you can see here that inflation was 9% in Q1, falling to 4% in Q2. But our sales were minus four, and Q1 moving to positive 2 in Q2. So you can really see volume recovering there from minus 13 to minus 2%. And that really is encouraging that as we get deflation in some products, particularly like timber, we're seeing the volumes recover. Then on Do It For Me, we had an encouraging first half. Delivered sales were 5.8% up, and we're working through the elevated order book, and that's given us a tailwind, of course, for delivered sales. But encouragingly, our ordered sales are also up 1.8% in the first half. Now, our leads in the market are much softer, but what we're doing is we're converting at a higher rate, which really shows the power of what we're offering in our Do It For Me showroom business. We mentioned here that installation rates are higher than previously, so we're really making the most of our differentiated offer there where we can offer an end-to-end service, and that's really supporting the sales number. So overall, a robust performance on sales in the first half. So the next slide talks about profit in a little bit more detail, and you can see here the components of what's driving profit. And the message here really is that this is very much in line with what we guided at the beginning of the year. Now in this chart, we've put distribution as part of overall cost base, slightly different from earlier on where it was part of margin. And the reason for that is explaining some of the productivity savings that we've been getting. So if you look at the first two components on this bridge for core and do it for me, this is effectively the effects of sales and product margin. You can see it's very slightly negative. Then in the operating cost box, I wanted to remind you of what we guided at the beginning of the year. We guided that we would see a lot of inflation in some of our cost base and everything other than energy we would be able to offset by productivity savings. And as you can see there, we've made a very good start in the first half along that line. Then the two increases in costs that we wouldn't be able to mitigate with productivity in our guidance at the beginning of the year. First of all, energy costs were expected to be 10 million higher. And as you can see here, that's 2.7 million higher in the first half. And the reason why that's not closer to 5 million for half a year is because our new energy contract came in in Q2. So the effect of that year on year will be double in the second half. And then the second component, we guided to around 5 million of additional costs for growth investment, investment in our growth lever initiatives. And as you can see, we're 2.2 million at the half year point. So really very much in line. So the final component of this slide I just wanted to draw your attention to is that this is the first period where we're reporting SAS investment costs. We've guided to 8 to 10 million for the year as a whole, and we've had 3.7 million in the first half. So turning now to cash and the balance sheet. As I mentioned, we continue to operate with a really strong balance sheet, and we ended the half with 190 million of cash. As you know, the shape of our working capital is that we have an increase in cash in the first half, and then that unwinds in the second half. Now, working capital inflow this half year is a little higher than it was last year due to a number of factors, some of which are permanent, some of which are timing. About half the impact year on year relative to the normal working capital movement is an improvement in our stock position. And you might remember last year we talked about an investment in our stock. which we're now able to unwind in a controlled way. And that was planned and that's coming through, which is really good. We've got some slightly higher accruals, which are broadly timing. And actually in a couple of cases, we've improved our supply terms as well, which is a benefit for working capital. So as I said, some of these are timing, some of them are more permanent impacts. Overall, we expect to finish the year with slightly higher levels than we started the year of 100 million. You can see there the 99.5 at the end of December 22. And that's after a record year of investment, maintaining a good dividend and starting our share buyback. I then just wanted to briefly touch on the capital allocation policy. And as you can see on this slide, this is a reiteration of what we said in our update in July. And I just wanted to remind you of it. The four key pillars that we start with a strong balance sheet, and we also want to always operate with a strong balance sheet, always operating with net cash to make sure that our low point in the year, which comes in December, we always have at least 50 million. The second part is that we will invest in the growth initiatives in our business, both to maintain the business, but also to grow as well. And we'll aim to always have a targeted blend ROIC of more than 15%. And this year we'll be having record levels in investment in the business. will pay a good dividend, and the dividend cover will be between 1.5 times and 2.5 times in most cases. This year actually will be slightly outside of that range because we've already agreed to maintain the cash dividend from last year, which will put us slightly outside of the range, but as profits increase, then obviously we'll get back to that range quite quickly. And then the fourth component is where we have excess cash, we will give that back to shareholders, and we've started the £25 million share back that we announced in July. The second thing I just wanted to remind you all from the update in July was the impact on our accounting of SaaS investments and IAS38. So if we could just move to that slide now, please. This is exactly the same as the slide we had in July, but really important to note here a few things. When we separate it from Travis Perkins and look forward to what we are going to be spending our tech investment on, a good proportion of that is going to be in SaaS, software as a service platforms. Now, previously, a lot of investments capitalized. We now think that 50% to 75% of our IT project investment will be in SaaS platforms. And under IAS 38, that needs to be expensed. So the impact of that is nothing in terms of cash impact, but we do see a higher charge on your expense line for IT expenses in the short term, which lowers profit. But over time, what also gets lower is amortization. And that builds, of course. So after four years, actually, the profit impact is neutralized. You can see that in the table below here. In the cash bar, at all times, the cash impact is zero. But the total impact on PBT, as you can see, will be about 8 to 10 million this year. But as the amortization lower amortization number builds, the impact declines. So by 2027, the impact will be zero. But we just wanted to make sure everyone was very clear on that. So I'm just going to end now on outlook and guidance. And after a good first half, we've continued to trade in line with our expectations for July and August. That means that we're comfortable with full year expectations from an analyst consensus perspective, which on a post-SAS basis is between 45 and 48 million for PBT. And we continue to expect that the productivity savings will come through in our plan. But do remember that the energy costs are going to be higher in the second half because that's when our contract comes through. And then we've got some technical guidance there for you and we can pick up any questions of those if you have them. So to summarize, the business continues to deliver. In a tough environment, we're delivering good sales numbers, strong market share growth, and delivering against our profit expectations. We're returning cash to shareholders while still investing in future growth. And with that, I'll hand back to David.

Thank you, Mark. As a reminder, our balanced business model affords us greater resilience to consumer trends and gives us sustainable competitive advantage. Our three customer propositions mean we can support all customers with their home improvement plans with the ultimate goal of achieving our purpose, which is to simply help the nation feel house proud. Beyond addressing a broad customer base, the key components of our operating model are highly curated product ranges, of which two thirds is our own brand, providing ease of choice, value, and greater availability for our customers. A truly digitally-led approach that in turn drives a unique service model, structured to meet the needs of each customer journey, all across a low-cost, right-sized physical estate. the output of which is industry-leading performance on all key retail KPIs. And underpinning all of this, we have a number of self-help strategic growth levers, which we continue to invest in to drive future growth opportunity. The strength of this business model can be seen in this chart on the left, illustrating our consistent market share outperformance over the past five years, and this growth is despite a 5% decline in the number of Wix stores. In that same timeframe, we have doubled our TradePro membership and broadened our core DIY customer base, appealing to younger home improvers, including more women and rental tenants. We continue to increase sales densities per square foot, and we're also seeing record scores across all our customer satisfaction measures. all of which gives us confidence in the opportunity for future investment in our program growth levers and our ability to gain further market share. If we look at the core part of our business, which incorporates local trade and DIY, what we see is that local traders continue to enjoy buoyant demand, with close to one in four having a pipeline of over a year. As a reminder, these are our most strategically valuable customers, spending 10 times more in a year than a typical DIY customer. They continue to turn to our TradePro scheme for the simplicity and efficiency it affords them as they look to save themselves both time and money. We are adding around 10,000 new members every month and now have north of 800,000 members, which is driving double digit growth in TradePro sales. We're delighted to have maintained such a strong rate of acquisition and our target of 1 million members still remains. We will get after this by continuing to transform TradePro from a simple discount scheme to a loyalty scheme, encouraging more members to spend more with us more often. In June, we introduced TradePro Rewards and we're building a pipeline of new partner offers to give members access to exclusive lifestyle rewards, such as discounted gym membership. And we're using our machine learning to send them highly targeted, personalised communications based on what we know about their shopping behaviours and the type of jobs they undertake. Again, helping to save them both time and money. Turning now to DIY, this market continues to normalise from its post-COVID highs with a reducing rate of year-on-year decline. Unsurprisingly, the DIY customer is being a bit more cost-conscious. Our research is certainly showing that whilst people are still doing the same or more home improvement projects, the nature of these projects has changed and they are shifting focus to smaller jobs such as shelving, painting and energy-saving quick wins. We've responded rapidly to these customer trends with new in-store categories that are focused on the smaller DIY tasks and continue to innovate behind our strong own brand in these areas. Unsurprisingly, the other thing that's been on every customer's mind is how to save energy in their home. We're getting ahead of the curve by building up our range of energy-saving products and services, everything from loft insulation to electric vehicle chargers and solar panels to help customers reduce their consumption and bring down bills. Sitting within our core business, we also have our more affordable, ready-to-fit kitchen ranges, which we've recently relaunched as Wix Lifestyle Kitchens. Since the relaunch back in April, we've seen a 16% sales increase, with the past couple of months seeing an even stronger performance. This, for me, is just a great example of how we are innovating with new ranges and the introduction of a free design service available to all customers. And it's not just in our core business that we're innovating. We are doing some exciting work in our Do It For Me showroom business. This, combined with our older, more affluent customer profile, means that we are seeing good levels of conversion despite fewer leads in the market. Typically, a customer will start their new kitchen or bathroom journey by searching online. We use a platform called SimilarWeb to measure the total volume of digital visits to our website and competitor websites. Of all those visits, we hold a market-leading position and have grown our share by 12% year on year. Over the summer, we've rebranded our showroom kitchens as Wick's Bespoke Kitchens. And with that, we've introduced eight new ranges, including this lovely and quite stunning Natura one pictured here, along with new worktops, appliances, sinks, taps, et cetera. We've delivered around 300 new product launches in our bathrooms proposition, which is driving strong growth and which is now the most prominent bathroom brand in the UK. We're also investing in new tech for both our design consultants and our installers to make their lives easier and the customer experience even better. Our installer base of over 3,000 approved installer teams nationwide sets us apart from the competition and we're delighted this year to once again be awarded distinction by the Institute of Customer Service for our installation service. We're making great progress on our store refit programme with 6 out of 11 refits for 2023 already completed and the rest is on track to be done by the end of the year. The refit programme continues to yield strong returns with an average ROKI of 25% and substantial sales uplifts across all channels. More than 70% of the estate is now in the new format. We're really pleased with the performance of our first new store in Bolton that opened last October. We're equally pleased to have opened a new store in Chelmsford this July and will open in Torquay and Widness in the second half with a plan for 20 new stores over five years. So in summary, our strategy does continue to deliver. It's been a good first half with positive like-for-like sales and profit performance in line with expectations despite the challenging market conditions which we do expect to prevail. We're on track with our productivity plans and these are successfully mitigating cost inflation. Our accelerated refit and new store opening programme is progressing well. We are confident in our distinctive proposition, unique service model and continued investment in our proven self-help growth levers that will drive further outperformance. And that our capital allocation framework will deliver an efficient capital structure and strong shareholder returns. So thank you for listening. Mark and I will now be happy to take any questions you have. Thank you.