Wickes Group plc

everyone and thank you for joining us here today and also for those 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 30th of December 2023 and to share our outlook for the rest of the year. We will also highlight how our distinctive, balanced business model and continued investment in our proven growth levers is driving market outperformance and presents us with a great opportunity in the UK's large home improvement market. I'm delighted to say we've delivered a robust sales performance with our relentless focus on providing great value and service for customers in what continues to be a challenging market. I'd like to take this opportunity to thank all of my 8,000 colleagues for their incredible work in delivering these results. We've delivered some great results across each of our strategic levers with significant growth in our digital TradePro scheme, record customer satisfaction scores, a successful relaunch of our ready-to-fit Wix lifestyle kitchen range with sales up 24%, and good progress on our new store openings and refit programme, more of which I'll share later. Investment in our growth levers combined with disciplined cost management and successful execution of our productivity plans has resulted in us achieving profits ahead of market expectations and continued market share growth. We have a strong cash position at the year end and are maintaining our four-year dividend at 10.9 pence in line with guidance. And during 2023, we completed 10 million of the 25 million share buyback programme. We do expect 2024 to be another challenging year, but confidence in our balanced business model and growth levers makes us comfortable with market consensus forecast. You'll have seen today that we've announced our acquisition of a majority stake in Solarfast, which is a leading solar installations business and will give us a great platform on which to build our leading presence in the exciting and emerging market for home energy solutions. 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, 2023 has been a good result for Wix in challenging market conditions. But before we get into the numbers, I just wanted to make a note of the fact that we have changed the labeling on our revenue streams. So what we previously called core, which was product sales to trade and DIY customers, will now be called retail. And where previously we had our kitchens and bathrooms showroom business called Do It For Me. It will now be design and installation. And we're hoping that that will be clearer for everybody going forward. The numbers, by the way, are exactly the same. They haven't changed. It's just the labels. So back to the results. Revenue is broadly flat for the year, although there was some variation across the year, particularly in design and installation. And we'll talk you through that in a moment. Gross margin was up in the year by about 20 basis points as the effects of inflation eased across the year. Our adjusted profit before tax after SAS impact was 52.0 million pounds. Now that was down year on year and that primarily reflected increases in our operating costs and more on that in a moment. As David mentioned, we continue to operate with a very strong balance sheet. We ended the year with 97.5 million of cash, but that is the low point in our working capital cycle. We actually averaged 155 million across the year. And in line with the capital allocation policy that we announced in July of 2023, we are confirming the full year dividend of 10.9 pence per share. And as David mentioned, we've completed by the end of 2023, 10.1 million pounds out of our 25 million pounds share buyback. That rose to 12 and a half million pounds in February. And this morning, we're starting the second half with another 12.5 million in the coming weeks. So just looking at the P&L now. So 2023, we started to see real easing in inflation in the products that we sell. But there's still a lot of inflation in our cost base. So that compression in the P&L made things much harder. And in light of that, I think the profitability result that we've shown is a lot of resilience in the business. Revenue is broadly flat, and we've got a chart on that in a moment to break that down. Gross profit was up 19 basis points year on year, and there were two effects here. The first is that there was a slight dilution in the trading margin from the products we sold, mainly because of the growth in TradePro, which of course is sold at a 10% discount. But more than offsetting that was productivity savings in our distribution costs, which are included in gross profit, And so overall, gross profit was actually up year on year. Now, outside of distribution, other operating costs have increased substantially in the year, with inflation in wages and energy in particular, but very much in line with our guidance, which I'll show you in a moment. But careful cost control overall has enabled us to deliver adjusted PBT of £59.5 million on a pre-SAS basis and £52 million on a post-SAS basis. So let's break that down. a little bit more for you. So this slide shows the sales breakdown between retail and design and installation in each half of the year. So in retail, you can see an improving picture between first half and second half. And in the table on the right, you can see that on a quarterly basis. We've had three consecutive quarters now of like-for-like growth. And as you can see, inflation easing considerably over the year, starting in Q1 at 9% and actually being in mild deflation by the end of the year. So actually a strong improvement in volume as we progress through the year. Design and installation really a tale of two halves. So in the first half we had strong delivered sales numbers and this was supported by the elevated order book that we were still working through from that post-Covid period. But then in the second half three factors meant that we were in negative like for like from our delivered sales basis. The first is that the order book had become much more normalized. The second was the software implementation issue that we mentioned in our trading statement a few weeks ago, which just prevented us from delivering sales as quickly as we wanted to to some customers. And the third was just a softer demand in market for these bigger ticket projects. So given the overall market backdrop of a weaker consumer, we think the sales performance for 2023 was robust, particularly for retail. So this chart shows the profit bridge of how we've delivered the profit during the year. Now, on the first two bars on this chart, this is trading margin. And we've taken distribution out of this. It's slightly different from growth margin at a statutory level. But just the margin on the products that we sold, you can see they're slightly negative, particularly in our design and installation business. And the two factors that drove that, one is the weaker demand I talked about in the second half, but also another factor is the higher cost of credit. We support our customers and subsidise them for the consumer credit we offer in our design and installation business. And as rates went up, we didn't push our rates up to consumers, so that cost went up to us as a cost in the business. That comes through into margin. But on cost, we've delivered very much in line with what we expected for the year. So you may remember we guided at the beginning of the year that we would have productivity savings of around 20 million that would offset all the cost inflation we had in the business except in energy costs. And as you can see, that's exactly what we have delivered. Energy costs themselves have actually come in a bit better than we expected. So we guided to an incremental 10 million year on year. They've come in at around seven, as you can see. a combination of some energy-saving initiatives in the business, plus also rates in the market coming down in the second half. And then the growth investment that you can see there, very much as planned, areas of technology, our property program, and also our new customer experience center for our design and installation customers. Interest income in the year was higher, a combination of the strong cash we had in the bank plus also rising interest rates. And that helped to offset the increase in consumer credit costs that we were facing earlier in this bridge. Now, we've shown here adjusted profit before tax with and without the impact of SAS, which you can see was an impact of 7.5 million pounds in a year. From 2024 onwards, we will just report PBT on a post-SAS basis. So turning now to cash and the balance sheet. We continue to operate with a strong balance sheet, ending the year with $97.5 million of cash. And that's after the first $10 million of the buyback. As I mentioned earlier, our working capital cycle means that December is the low point for us in terms of a cash position, and we averaged $155 million during the year. CapEx was very much in line with guidance. CapEx of $38 million. You need to add to that another $7.5 million of SaaS investment combined around 45 million total investment in the business in the year, very much in line with our guidance. We've listed out here 8.9 million of IT separation costs. Now, this is the final stage of the separation programme to move our systems away from our previous parent, Travis Perkins. This is now complete, and there'll be no costs of that sort from 24 onwards. So you can see the impact of the dividend there and our share buyback programme. So in total, those two things combined we've delivered 37.5 million of cash back to shareholders in the year. So, I'll finish with outlook and guidance. So, the first 11 weeks of trading of 2024, the retail side of our business has been in line with the previous year, which I think is a good result given the really miserable weather we've been having. Now, design and installation is in negative territory in both ordered and delivered sales. The continuation of weaker demand that we talked about in Q4 is coming through. Our conversion rates on projects are still really strong. There's just fewer leads in the market. 2024, we're going to have good productivity plans, but they won't be enough to offset all of the cost increases that we're facing. The bigger than expected increases in business rates and in national minimum wage in particular. But overall, we're comfortable with the consensus for the year for 2024. Now, the technical guidance we've also provided for you there. I won't go through those, but that's for your information. So to summarise, the business continues to deliver well in a tough environment with beaten expectations for profit for 2023 with tight cost control. We anticipate 2024 to be another challenging year where it will be hard to grow sales and cost inflation will be high. But we have a strong balance sheet, a clear strategy, and proven growth levers for when recovery comes. So with that, I'll hand back to David for a business update.

Thank you, Mark. This slide will be familiar to you. It outlines the strong portfolio of growth levers that we have to win in the market. I'll now take a few minutes to share how our investment in these growth levers is delivering results. 2023 has been a fantastic year for our local trade business as more and more tradespeople turn to Wix to save them both time and money. Our Digital Trade Pro scheme makes it easy and convenient for members to shop through the app and our store teams pick, pack and dispatch straight into their vans, all with a 10% discount. As a reminder, TradePro customers are our most strategically valuable customers. They spend 10 times that of an average DIY customer. You can see from this chart that we're making great strides in growing membership to the scheme with record levels of signups. 135,000 tradespeople joined in 2023, taking total membership to 881,000. Growth in membership has driven an 11% growth in sales in the year and encouragingly, we are seeing a very high retention rate of active customers at 85%. We continue to focus on improving the experience for this key customer base and have made further improvements to the TradePro app. For example, we've added new account features, including project planning functionality and the ability to simply see a product priced with or without VAT, which we know the Trade find very helpful as it's something that most of our competitors don't provide, as their pricing is typically ex-vat. We run regular communications to TradePro members using our machine learning tool. This provides us with the data and insight to personalise and tailor our communications to them, which is driving material incremental revenues. And these are busy people. We regularly ask them through our Mood of the Nation research programme about their pipeline of work. and currently more than one in four tell us they have work lined up for over 12 months. Finally, on this slide, until now, TradePro has very much been focused on the local small trader. However, we are now building out the platform to access the wider B2B market, targeting larger businesses, trade federations, and SME operators. And I'm pleased to say that we're already enjoying some good success in getting these businesses to sign up to the scheme. And I look forward to sharing more information with you about our TradePro and our local trade business at the Capital Markets event that we'll be holding in May. Turning now to the design and installation side of our business, which, as Mark has already explained, was previously called Do It For Me, this market has been more subdued this year, with people cautious about spending on those big ticket items like a new kitchen or bathroom. And to ensure customers continue to come to us for their new kitchen or bathroom, we have delivered some exciting innovation to both product and service. We rebranded our showroom kitchen range as Wick's Bespoke Kitchens and introduced eight beautiful new kitchens. We anticipated that the market would be more subdued and took the intentional move to expand our presence in the high volume market for lower priced point kitchens with the relaunch of our ready to fit range as Wick's Lifestyle Kitchens. With 15 stylish new kitchens they come with a free design service provided by our experienced design consultants, either in-store or online in our virtual design showroom. And we're really pleased with the results so far, having seen a 24% increase in sales since the relaunch at the half year. This is a significant product category for us in a large market, and we're excited about the growth opportunities it offers. We have also invested significantly in tech innovation to enhance our customer service and installation proposition. We have introduced new field service management software for our installer teams that systemizes each of the steps along the installation process, reducing manual activity and potential human error and increasing the speed of the customer journey. Our new Customer Experience Centre is now live for all new design and installation customers, giving every customer their own personal project manager who coordinates and manages communication between them, the installer, and product delivery teams. This has reduced the number of customer queries as well as the average time to installation, and we've seen this translate into a very strong Net Promoter Score of 92%. Our installer base of more than 3,000 teams is one of the great strengths of our design and installation proposition, and our customers greatly value the quality and assurance that our Wix installer teams guarantee. And now more than half of all customers use our installation service. We're also delighted to retain our distinction level of service award from the Institute of Customer Service for our installation quality. When it comes to DIY, we've been working hard to broaden our customer base and to adapt and innovate our product offering to meet the demands of today's consumers. We've seen through our research that as people are more cost-conscious, they're still looking to do DIY but are doing smaller projects, such as decorating or putting up shelves. With this in mind, we've expanded our product ranges that cater to these smaller projects. As customers continue to search for ways to reduce their energy costs and improve their carbon footprint, we've developed our range of energy-efficient products, as well as strengthen our marketing and promotional activity in this space. In addition, the pandemic brought about a real shift in the market as more people, especially more women and younger people, gave DIY a go. We sought to capitalise on this by proactively marketing to younger consumers and women to broaden our brand's awareness and appeal. As well as the go-to brand for confident DIYers, we want to be seen as the place to go by those people who might not be so DIY savvy. And we've been surprised and delighted with the results, seeing a significant growth in our female customer base from one in six in 2019 to over one in four today. Our adoption of more digital payment options such as Apple and Google Pay and Buy Now Pay Later tools such as Klarna have also helped us gain access to a younger customer demographic and brought incremental revenue. As a brand, we continue to strengthen our digital market share, which is up 1.5 percentage points to 16% as measured by SimilarWeb. Turning now to new stores and refits. As our refit programme progresses, the emphasis now is on building out the network with brand new stores. We opened three fantastic new stores in Chelmsford, Torquay and Wideness in the year, creating some 90 jobs in those communities. Of our 229 stores, 175 of them are now refitted in the new format and we're very encouraged by the performance. We consistently see a step change in sales and ROKI of around 25% in these newly refitted stores. Across our estate, we continue to invest enhancing our service model and increase the square footage of fulfilment space in over 23 stores by a further 36,000 square feet, giving us the capacity to fill more click and collect and home delivery orders. And looking ahead to this year, our refit and store opening teams will be equally busy with eight new refits and four new stores to deliver, including the opening of a new store in Long Eaton this Friday. The output of this investment and development of our growth levers can be seen in the impressive results we are achieving across these key measures. Through the lens of the 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 2023 has been a record year across both measures. You'll see from the chart on the top right that we've made market share gains over the past five years. This isn't simply a function of more stores as we actually have fewer stores now than in 2019 compared to the overall store number growth in the market. We're delighted to have successfully lapped the incredibly strong share growth in 2022 that was boosted by a strong first quarter as we were one of the only retailers with a ready supply of fence panels when the country had those terrible storms in the February and March of that year. A key measure for any retailer is sales densities. We have some of the highest levels of sales per square foot in the industry, thanks to our multi-channel service model and seamless integration of digital and physical sales, with two thirds of sales starting online and 98% of sales touching the store. And now to our built to last responsible business strategy. I won't go through each pillar, but just pick out some highlights. Our Wix community programme goes from strength to strength and we're all tremendously proud that in 2023 we helped around 1,500 community projects, making a difference to the lives of some 500,000 people across the country. Our switch to 100% renewable energy has put us well on track to deliver our Scope 1 and 2 science-based targets. And in our homes pillar, I've already mentioned that we've ramped up our range of energy efficient products with the least energy efficient housing stock in Europe. We want to help customers find ways to improve the energy efficiency of their home and reduce their bills. And indeed, as we seek to respond to this need, we have announced our plans to acquire the majority stake in GasFast Limited, which is the parent company of SolarFast. Solarfast is a solar panels installations business who in the last two years have installed around 3,700 projects in UK homes. This acquisition will enable us to rapidly accelerate our design and installation growth lever and enter in a meaningful way to the emerging and exciting market for energy saving solutions. With the strength of the Wix brand and our unique experience in designing and installing complex projects at scale, we see a great opportunity to be a trusted brand in what is currently a highly fragmented market and to build a market leader presence. The full details of the acquisition can be found in a separate R&S that we issued this morning. But in summary, we are acquiring a majority stake and plan to grow the business with the current management team. So to conclude, 2023 has undoubtedly been a challenging environment, but our balanced business model, great value in service, relentless focus on cost control and investment in our growth levers has seen us deliver robust sales and profits ahead of market expectations. We do expect 2024 to remain challenging and we will continue to invest both in our growth levers and through the acquisition of Solarfast because the scale of the opportunity is great. I've said before that strong businesses get stronger in tough times. We are well placed to win in the UK's large home improvement market and continue to deliver for our colleagues, customers and shareholders. Thank you for listening. Mark and I will be very happy to answer any questions you may have.