10 September 2024

 

Wickes Group plc - Interim Results 2024

for the 26 weeks to 29 June 2024

 

Resilient performance in H1

FY24 PBT outlook remains unchanged, underpinned by improved trend so far in Q3

 

 

Financial Highlights

•	Total revenue of £799.9m (H1 2023: £827.7m) down -3.4% year-on-year
•	Adjusted gross margin +24bps
•	Operational costs flat year-on-year following planned management action taken to mitigate impact of inflation
•	Statutory profit before tax of £22.9m (H1 2023: £21.1m)
•	Adjusted profit before tax of £23.4m (H1 2023: £31.1m)
•	Net cash position of £152.4m (H1 2023 £190.0m), after net initial payment for Solar Fast acquisition1 and £28.9m returned to shareholders
•	Interim dividend declared of 3.6p

 

Strategic Highlights

•	Record Retail2 market share3 with particular gains in the strategic categories of decor, garden, tiles & flooring; Positive volume performance and LFL4 sales growth in Retail
•	Strong TradePro sales growth +14%, with growth in active members5 of 18% to 541,000 (H1 2023: 459,000). In September the total number of TradePro members hit the 1 million mark for the first time
•	Successful focus on our lower-priced Wickes Lifestyle Kitchens6 range driving sales +19%
•	Challenging market environment for large purchases led to 17% decline in Design & Installation7 delivered sales8 and high single-digit decline in ordered sales
•	Investment in new stores and refits driving returns, with 3 refits completed and 2 new stores opened
•	Initial roll-out of Wickes Solar, with point-of-sale assets in 50 trial stores and digital journey live on Wickes website
•	Entry into the FTSE4Good index, recognising our Responsible Business Strategy

 

NB. Retail² refers to the revenue stream formerly described as Core. Design & Installation⁷ refers to the revenue stream formerly described as DIFM or Do-it-for-me.

 

Current Trading & Outlook

 

Trading in Q3 so far has seen an improved trend; in Retail, LFL sales growth has strengthened and Design & Installation is stabilising.  Whilst the market outlook remains uncertain, current trading along with the planned action taken to mitigate the impact of inflation underpins management's outlook for adjusted PBT for FY 2024⁹.  Wickes' proven growth strategy and balanced business model leaves us well positioned for growth as market conditions improve.  Our Q3 trading update is expected to be released in late October.  

 

David Wood, Chief Executive of Wickes, commented:

 

"This first half performance is testament to the hard work of all our colleagues and demonstrates the strength of our balanced business model.  We achieved further volume growth and record market share gains in Retail, with TradePro remaining a key differentiator. The market for Design and Installation remained tough during the half and Wickes was not immune; nonetheless, we have seen a positive response to our value-led Wickes Lifestyle Kitchen range, which is growing strongly. 

 

"We are on track for the remainder of the year and have been encouraged by trading at the start of the second half.  Looking further ahead, our outstanding customer offer, proven growth levers and focus on cost control leave us well-placed within a home improvement market which continues to offer significant opportunities."

 

 

Summary of interim financial results

 

£m	26 weeks to 29 June 2024	26 weeks to 1 July 202310	Change
Statutory revenue   Retail   Design & Installation	799.9 633.2 166.7	827.7 626.8 200.9	(3.4)% 1.0% (17.0)%
Statutory gross profit   Gross profit margin	289.7 36.2%	294.7 35.6%	(1.7)% +0.6ppts
Statutory operating profit   Operating profit margin	34.9 4.4%	32.0 3.9%	9.1% +0.5ppts
Statutory profit before tax	22.9	21.1	8.5%
Adjusted11 gross profit   Gross profit margin	289.2 36.2%	297.3 35.9%	(2.7)% +0.2ppts
Adjusted11 operating profit   Adjusted operating profit margin	35.1 4.4%	42.0 5.1%	(16.4)% -0.7ppts
Adjusted11 profit before tax	23.4	31.1	(24.8)%
Adjusted11 basic earnings per share	7.1p	9.4p	(24.5)%
Basic earnings per share	6.9p	6.3p	9.5%
Interim dividend	3.6p	3.6p	N/A

 

 

Investor & Analyst meeting

 

A presentation for investors and analysts will be held today at 8.30am (UK time), followed by a Q&A with the Wickes management team. A live webcast can be accessed at: https://brrmedia.news/WIX_HY_24

 

A recording of the webcast will be available on the Wickes Group plc website later today: https://wickesplc.co.uk

 

 

Enquiries

Investors and Analysts Holly Grainger Director of Investor Relations +44 (0)7341 680426 holly.grainger@wickes.co.uk

Media Lucy Legh, Will Smith, Eleanor Evans PR Advisers to Wickes +44 (0)203 805 4822 wickes@headlandconsultancy.com

 

 

About Wickes

 

Wickes is a digitally-led, service-enabled home improvement retailer, delivering choice, convenience, value and best-in-class service to customers across the United Kingdom, making it well placed to outperform its growing markets. In response to gradual structural shifts in its markets over recent years, Wickes has a balanced business focusing on three key customer journeys - TradePro, DIY (together reported as Retail) and our project-based Design & Installation division.

 

Wickes operates from its network of 229 right-sized stores, which support nationwide fulfilment from convenient locations throughout the United Kingdom, and through its digital channels including its website, TradePro mobile app for trade members, and Wickes DIY app. These digital channels allow customers to research and order an extended range of Wickes products and services, arrange virtual and in-person design consultations, and organise convenient Home Delivery or Click-and-Collect.

 

 

Forward looking statements

 

This announcement has been prepared by Wickes Group Plc. To the extent it includes forward-looking statements, these statements are based on current plans, estimates, targets and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Neither Wickes Group Plc, nor any of its officers, Directors or employees, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. Wickes Group Plc does not undertake any obligation, other than in accordance with our legal and regulatory obligations, to update or revise any forward-looking or other statement, whether as a result of new information, future developments or otherwise.

 

 

 

Business review

 

Market

 

The UK home improvement sector represents a large and attractive market of c.£27bn¹².  Within this market we have a significant opportunity for long-term growth, given our relatively small market share of c.6%. The challenging trading conditions of the last two years have resulted in consolidation in the market with the demise of retailers such as Wilko, CTD Tiles and Carpetright.  The market has grown at c.2.5% on average over the past ten years, driven by the high average age of the UK's housing stock, the rising number of UK households and increasing home ownership. Specialist DIY sales are forecast to grow by 16% between 2024 and 2029, according to Mintel¹³ driven by improved confidence and expected improvement in the housing market.  People are also spending more time in their homes as a result of the rise of hybrid working, while there is an increasing trend of consumers investing in their homes for improved energy efficiency.

 

The Wickes home improver customer base tends to be slightly older and more affluent than the UK average, yet these customers have not been immune from recent cost of living pressures, including rising mortgage rates and rental costs, as well as continued inflation. High levels of interest rates have also suppressed UK housing transactions, which are often a trigger to undertake major home improvement projects, although this is typically partially offset by renovations to properties in which consumers decide to stay for longer. Our business has very limited exposure to civil engineering or the new build housing market, given that our customers are mostly home improvers and independent tradespeople.

 

The high cost of energy has motivated consumers to seek out ways to improve the energy efficiency of their homes. The average household energy efficiency rating for England and Wales is band D¹⁴ and the UK's 28.6m homes are among the least energy efficient in Europe, losing heat up to three times faster than in continental Europe¹⁵. At Wickes we recognise how important climate change is and we are committed to helping our customers to improve the sustainability of their homes, to save money on their energy bills and to reduce their carbon footprint. The May 2024 report from our proprietary Mood of the Nation survey showed that 15% of home improvers have considered installing solar panels over the last year. 

 

The August 2024 report from our proprietary Mood of the Nation survey shows that planned spend by UK consumers on a new kitchen or bathroom remains below historical norms, but stable over recent months.  Demand has been stronger in the <£4k segment of the kitchens market.  Product categories which are linked to large projects have been more challenging, such as tiles & flooring.  There has been continued interest in DIY but with a focus on smaller projects, with consumers spending a bit less.  Smaller DIY projects remain the most popular type of DIY work completed in the past year, according to Mintel¹³.  The August 2024 Mood of the Nation survey also shows that local trade professionals remain busy, with around 50% of tradespeople still having a pipeline of work over three months and around 1 in 4 having a pipeline of work of more than 12 months.  Tradespeople remain thrifty, with 28% being careful with the quantity of materials bought, in response to the higher cost of materials, compared to 19% in July 2023. 

 

 

Progress against strategic growth levers

 

The company's strategy, as outlined at the time of demerger, has delivered strong operational progress centred around developing and extending the Group's growth levers. These contribute to an improvement in our products and services, saving our customers time and money. Continued investment in the following growth levers will drive further market share growth in the coming years:

 

1.	Winning for trade
2.	Accelerating Design & Installation
3.	DIY category wins
4.	Digital capability
5.	Store investment
6.	Enhanced store service model
7.	A winning culture

 

 

 

1.      Winning for trade

 

Our TradePro membership scheme continues to attract local traders, who choose Wickes for its strong value credentials and simple discount scheme, high quality products, availability on the lines that matter most, as well as the convenience of our 30-minute Click-and-Collect service.

 

Total membership of the TradePro scheme surpassed the one million mark in early September, achieving the target set at the time of demerger.   Sales from TradePro members increased by 14% in H1 2024 compared to H1 2023. An 18% growth in the number of active customers was partially offset by a slight decline in average basket size as tradespeople have been managing their material quantities more carefully.

 

Customers signing up to TradePro typically demonstrate a positive shift in buying behaviour, with sales increasing +111% and the number of transactions increasing 173% in the six months after joining, compared to the 6 months before¹⁶.  There is potential to increase share of wallet over time, as the average annual spend per active customer is currently c.£1k.  We are using behavioural analytics to understand the drivers of average spending by decile.  Our proprietary and market-leading machine learning model, the Mission Motivation Engine (MME), drives deeper customer relationships and extracts greater lifetime value. 

 

 

2.      Accelerating Design & Installation

 

Design & Installation delivered sales⁸ reflected the continued soft consumer appetite for larger ticket purchases and a stronger comparative in H1 2023, related to the elevated post-Covid order book.  LFL sales declined by 18.3%, whereas ordered sales¹⁷ showed a single digit year-on-year decline. 

 

Our ongoing strategic focus on our lower-priced Wickes Lifestyle Kitchens continues to deliver good results, with sales up 18.8% year-on-year in H1 2024.  This range has enabled us to successfully serve the <£4k segment of the kitchens market, where demand has been strongest.  An increasing proportion of Wickes Lifestyle Kitchens projects now use our free design service, which has proven popular with both landlords and homeowners. 

 

The strong performance of our Lifestyle range meant that in spite of the challenging market conditions for large consumer purchases (which resulted in Design & Installation ordered sales seeing a high single-digit decline), ordered sales from all Wickes kitchen and bathroom ranges (Bespoke and Lifestyle combined) and associated installations  in H1 2024 was only -4% compared to H1 2023. 

 

In response to customer feedback about the showroom experience, we have simplified the customer journey, by ensuring that new customers are able to interact directly with a Design Consultant as soon as they begin the process, rather than speaking initially with a Kitchen & Bathroom assistant.  In addition to improving the customer experience, this will also reduce operating costs. 

 

We have continued to see strong attachment rates for installation, with over half of customers choosing to use Wickes to fit their kitchen and bathroom products, which leads to incremental spend on tiling, flooring and joinery, increasing the overall project value.  Wickes offers nationwide installation services through teams across the country. 

 

The acquisition of a 51% controlling interest in Solar Fast was completed on 21 May, following FCA approval, and is fully consolidated from that date.  The initial roll-out of Wickes Solar includes point-of-sale assets in 50 trial stores and the digital journey is now live on the Wickes website.  We have seen an encouraging early response, in both leads and conversion.  The market for domestic solar installations in the UK is in long-term growth with the market estimated to be worth £1.5bn pa by 2028¹⁸.  It is a highly fragmented market with no clear brand leader; with a trusted brand and significant experience in design and installation services at scale, Wickes is well-placed to be a market leader in home energy solutions.  We have an option to purchase the remaining 49% of the issued share capital of Solar Fast during the five years following completion, in tranches of not less than 10% of the issued share capital, based on a valuation of 6x last twelve months EBITDA at the time. 

 

 

3.      DIY category wins

 

Our market share has grown to record levels with increases across numerous categories, particularly in the DIY categories of decor, garden, tiles & flooring. 

 

The UK home improvement market has seen ongoing consolidation, following the demise of Wilko, CTD Tiles and Carpetright.  Wickes has continued to gain market share over this period of consolidation, with notable gains in paint as well as tiling & flooring.  Whilst market demand for large projects has been challenging and has impacted market demand for related categories such as tiling & flooring, Wickes' market share has continued to increase. 

 

We continue to strive for the best possible range, price and availability for our customers. Our right-sized stores sell a carefully curated range of c.9,000 SKUs and we are constantly reviewing the range to ensure that each product category is meeting expectations.  During H1 2024 we have conducted 10 range reviews with a strategic emphasis on introducing new and innovative products in our core categories as well as consolidating our existing SKUs.  New products introduced in H1 included acoustic wall panels and new garden trellis and pergola products, with the customer journey improved by new in-store graphics and packaging. 

 

 

4.      Digital capability

 

We continue to invest in our digital capabilities to deliver an integrated multi-channel shopping experience for our customers.

 

We use our proprietary and market-leading machine learning model Mission Motivation Engine (MME) to deliver tailored content to customers to help them complete their home improvement missions and this is driving significant revenues.  Our MME collects data to help us understand who our customers are, what they browse, what they buy, how and when, in order for us to produce personalised communications.  We have a comprehensive suite of MME-led programmes of marketing emails and app notifications, all of which are optimised for timing, audience and content for our different customer profiles, with incrementality measured against control groups.  These communications predict which products a customer may need and encourage them to go deeper into their project or mission.  Our lifetime value calculator assesses behavioural data to determine whether each customer is likely to be a high value customer, to determine their shopper type algorithm and gauge our marketing efforts accordingly.  The MME is a highly effective method of using first party data to inform personalised communications to thousands of individual customers. 

 

 

5.      Store investment

 

Investment in our store network continues, to modernise the stores, improve our showrooms and create additional fulfilment space.

 

Our refit programme continues to deliver c.25% ROCE with strong sales uplifts, particularly from the Design & Installation areas, where we are able to showcase our full offer of kitchens and bathrooms. The refits enable us to upgrade the efficiency of multi-channel order pick and despatch, which drives sales densities and underpins our 30-minute Click & Collect promise and increases customer satisfaction metrics.  179 stores, or 78% of the network, are now in our new format.  Three store refits were successfully completed during H1 2024, in Ashford, Burgess Hill and Slough. 

 

Our new store opening programme is progressing well, with two new stores opened during H1 2024 in Long Eaton and Durham, creating around 60 new jobs. We have an exciting pipeline of new stores planned for the coming years, as we target an overall estate of around 250 stores over the medium term.

 

During H1 2024, we closed two stores (Ashton Gate and Inverness) which were not meeting our returns criteria. We therefore ended the half year with 229 stores. 

 

Our property plans for 2024 are on track.  We are planning a total of seven refits for the full year and 4 new stores.  Our new store in Aberdeen opened in August and Leamington Spa is due to open in Q4. 

 

 

6.      Enhanced store service model

 

Our '4C' model aims to meet our customers' needs through all four of our store network journeys: Self Serve, Assisted Selling, Order Fulfilment and the Design & Installation showrooms. Our approach offers a seamless shopping experience for customers and ensures that our store estate works hard for us. Recent changes to the store estate have increased back of house capacity for Click & Collect and Home Delivery Order Fulfilment, while reducing the impact on customers in the store.

 

In response to customer feedback about the showroom experience, we have simplified the customer journey, by ensuring that new customers are able to interact directly with a Design Consultant as soon as they begin the process, rather than speaking initially with a Kitchen & Bathroom assistant.  In addition to improving the customer experience, this will also reduce operating costs. 

 

 

7.      A winning culture

 

We are proud of the Wickes culture which over the past fifty years has evolved to become a modern, inclusive workplace where all colleagues can feel at home and have the opportunity to grow their skills and develop their career. We continue to engage with colleagues so that they are informed, inspired and motivated to play their part in delivering our strategy through exceptional levels of customer service.

 

As part of our new Colleague Promise, we have rolled out flexible working to all roles in Support Centre and all store management teams.

 

 

 

Responsible Business Strategy update

 

During H1 2024 we have continued to focus on integrating our Responsible Business Strategy 'Built to Last' across our business and supply chain, with continued progress made across all three pillars of the strategy and our foundation topics.

 

The health and safety of our colleagues and customers remains our number one priority and is one of the key foundations of our Responsible Business Strategy. In H1 2024, we updated our Health & Safety Policy, which is available on our website, and launched a new incident reporting system across the business. We also published our Modern Slavery Statement, which sets out our plans for the year. 

 

In June the progress on our 'Built to Last' strategy was recognised with entry into the FTSE4Good index. 

 

 

1.      People

 

As part of our new employer value proposition, called our Colleague Promise, we have rolled out flexible working to all roles in Support Centre and all store management teams.

 

Inclusion and diversity remains central to our people strategy through our 'Feel at Home' colleague-led inclusion and diversity programme. This has continued to gain recognition externally with Wickes being shortlisted as one of the top 12 inclusive employers for 2024 at the British LGBT Awards 2024.  Our Head of Inclusion & Diversity has also been recognised as one of the top 12 LGBT+ Trailblazers and won 'Highly Commended' award in the 'Head of Diversity of the Year' category at the Rainbow Honours Awards.  Furthermore Wickes has been accredited by the UK government with Committed status in the Disability Confident scheme, reflecting our aim to offer accessible and fair recruitment processes to everyone and foster an inclusive environment. 

 

Our two-year charity partnership with The Brain Tumour Charity has now raised over £1 million, with the generosity of our colleagues, customers and suppliers, so is making great progress towards the £2 million target by the end of March 2025.  Wickes has been awarded Platinum Level in this year's Payroll Giving Quality Mark, which recognises and rewards organisations that encourage charitable giving through payroll giving.  The Payroll Giving Quality Mark is a government-backed accreditation, awarded by the Charities Aid Foundation, based on the offering and uptake of a Give As You Earn scheme, as well as the company's support through initiatives such as matched giving or running events and campaigns. 

 

Though the Wickes Community programme we have supported over 1,300 projects in local communities across the country.

 

 

2.      Environment

 

Wickes is amongst the first signatories to the Global Scope 3 commitment of EDRA/GHIN, the global trade body for home improvement retailers.  These far-reaching carbon reduction commitments align with our existing SBTi-validated targets.  We are collaborating closely with our strategic suppliers to work towards achieving our two Scope 3 science-based targets (SBTs) and a growing number of our suppliers now have their own SBTi-validated targets. 

 

After receiving validation from the SBTi for our near term SBTs in 2022, we are re-baselining our targets to take into account business changes in contracting out some of our distribution activities and improvements to our methodology.  Further to the statement made in our 2023 Annual Report & Accounts, we are providing an update on our LTIP targets. We expected the work to rebaseline our SBTs to be completed by the end of August, to allow us to confirm our ESG-linked LTIP targets. The rebaselining project has been more complex than anticipated, and as a result we now expect the rebaselining work to be completed by the end of this calendar year, and we plan to communicate the 2023-2025 and 2024-2026 ESG-linked LTIP targets at the same time.

 

We continue to source our electricity via a 100% renewable electricity contract and have been investing to reduce our energy consumption.  Voltage optimisers have been installed into a number of our stores and we are seeing a material reduction in the amount of energy consumed at these sites.  Our store in Torquay became the first in the estate to have an air source heat pump installed and the solar panels at our recently opened store in Aberdeen were installed by our own business, Solar Fast.  Heating controls have been rolled out across the majority of our stores and store lighting is progressively being upgraded to LED, which is leading to significant savings in energy consumption. 

 

All of our garden products are now peat free, after we stopped sourcing compost containing peat at the start of the year, ahead of the anticipated UK Government plan to stop the retail sale of all bagged peat compost in England and Wales. 

 

 

3.      Homes

 

Following the completion of the Solar Fast acquisition, the initial roll-out of Wickes Solar includes point-of-sale assets in 50 trial stores and the digital journey is now live on the Wickes website.  The market for domestic solar installations in the UK is in long-term growth with the market estimated to be worth £1.5bn pa by 2028¹⁸ and is a highly fragmented market with no clear brand leader.  With a trusted brand and significant experience in design and installation services at scale, Wickes is well-placed to be a market leader in home energy solutions. 

 

In order to further help our customers reduce the carbon footprint of their homes, we are also expanding our online range of air source heat pumps and EV charging products.  We now also offer improved information on our website as to how our products support sustainability.

 

In 2023 we met our target of eliminating unnecessary packaging, which resulted in a 7% like-for-like reduction in primary plastic packaging year-on-year.  Following this success, we introduced and published a Packaging Materials Policy in 2024, ensuring that we continue to limit the packaging used on our own-brand products. The policy also supports our work to achieve our other packaging targets, and deliver improved opportunities for our customers to recycle packaging. 

 

 

 

Financial review

 

Our financial results have demonstrated the strength of our business model, delivering a resilient performance in challenging market conditions.

 

Revenue of £799.9m, including £1.5m contribution by Solar Fast since completion, reflects a contraction in sales of 3.4% year-on-year. Continued volume-driven growth in Retail was offset by LFL declines in Design & Installation. Gross margin increased by 24 basis points, reflecting careful management of price and promotions. 

 

We faced significant cost headwinds this year with another rise in the National Minimum Wage as well as more general inflationary pressures across the business. Our planned productivity initiatives have helped to mitigate these headwinds, with savings made across a number of areas including distribution and shrinkage. 

 

Adjusted profit before tax declined to £23.4m (H1 2023: £31.1m) reflecting the factors noted above.  Statutory profit before tax increased by 8.5% to £22.9m (H1 2023: £21.1m).

 

There was £152.4m of cash on balance sheet at the end of the period (H1 2023: £190.0m), after £11.3m of share buybacks and the net initial payment for the acquisition of a 51% controlling stake in Solar Fast. 

 

 

Revenue

 

Revenue for the 26 weeks to 29 June 2024 was £799.9m (H1 2023: £827.7m), a decrease of 3.4% on the prior year. Net selling area was broadly flat year on year as new store openings in Long Eaton and Durham were offset with closures of some older stores. LFL sales for the period were -3.9%.

 

Retail revenue - sales from products sold to DIY customers and local trade professionals - increased by 1.0% to £633.2m (H1 2023: £626.8m). Retail LFL revenue increased by 0.6%, driven by positive volume growth, with selling prices in mild deflation.

 

Our TradePro business continues to perform strongly, with sales +14%. This is driven by increasing numbers of active members, +18% in H1 2024, as local traders continue to choose Wickes to save them time and save them money. Local tradespeople remain busy, with healthy pipelines of work. 

 

Our market share has grown to record levels with increases across numerous categories, particularly in the strategic categories of decor, garden, tiles & flooring. 

 

Wickes remains highly competitive on price, with weekly benchmarking of thousands of items to ensure we are competitive on the lines that matter most. Our strategy is to offer everyday low pricing with limited use of targeted promotions so that our customers can rely on consistent and transparent pricing.

 

Design & Installation delivered revenue⁸ - sales from projects sold by our showroom design consultants - was £166.7m (H1 2023: £200.9m), a decrease of 17.0% or 18.3% on a LFL basis.  This reflected challenging market conditions, with a softer market environment for large consumer purchases, as well as the impact of lapping an elevated post-Covid order book in the prior period.  Ordered sales¹⁷ in H1 2024 saw a single digit LFL decline. 

 

The attachment rate of customers choosing to use Wickes installation continues to be strong, driving increased average order values.

 

Statutory revenue decreased by 3.4% to £799.9m (H1 2023: £827.7m).

 

 

Gross profit

 

Adjusted gross profit for H1 2024 was £289.2m, a slight decrease compared to the prior year (H1 2023: £297.3m). Adjusted gross profit margin increased by 24 basis points, reflecting careful management of range, price and promotions.

 

Compared to adjusted gross profit, the statutory measure has been affected by the revised presentation adopted in the prior year to include net unrealised gains and losses on remeasurement of foreign exchange derivatives held at fair value relating to economic hedges (H1 2024: £(0.5)m, H1 2023: £2.6m). Previously, these net unrealised gains and losses were presented in net finance costs, whereas now these amounts have been presented in cost of sales, in order to reflect that these foreign currency derivatives are entered into to mitigate the foreign exchange volatility arising from our purchase of inventory. The effect of these adjustments has been to increase cost of sales in H1 2023 by £2.6m and to decrease net finance costs by the same amount, as described in note 2.

 

 

Operating profit

 

Adjusted operating profit of £35.1m decreased by 16.4% year on year (H1 2023: £42.0m) and the adjusted operating profit margin decreased to 4.4% (H1 2023: 5.1%). The decline in operating margin reflects the impact of pressure on operating costs due to wage inflation and other general inflationary factors as described above, coinciding with an environment of weaker consumer demand. These increases were partly mitigated by planned productivity initiatives which yielded gains of £5.1m.

 

Statutory operating profit increased by 9.1% to £34.9m (H1 2023: £32.0m).

 

 

Net finance costs

 

Adjusted net finance costs were £12.0m (H1 2023: £10.9m).

 

 

Adjusted profit before tax

 

Adjusted profit before tax was £23.4m (H1 2023: £31.1m), a decline of 24.8% year-on-year, reflecting a period of weak consumer demand combined with significant cost increases.

 

 

Adjusting items

 

Pre-tax adjusting item charges were £0.5m (H1 2023: £10.0m). These comprise costs related to the Solar Fast acquisition of £0.7m (H1 2023: nil) and costs related to the extension of the Revolving Credit Facility of £0.3m (H1 2023: nil), partially offset by derivative fair value gains on foreign exchange contracts of £0.5m (H1 2023: losses of £2.6m). 

 

 

Profit before tax

 

Profit before tax increased to £22.9m (H1 2023: £21.1m) reflecting the factors noted above, in addition to IT separation costs incurred in the prior period related to the demerger from former parent company Travis Perkins.

 

 

Tax

 

The tax charge for the period was £6.0m (H1 2023: £5.1m). The underlying effective tax rate (before adjusting items) for the period was 25.4% (H1 2023: 23.8%).  The increase reflects the full year impact of the 25% corporation tax rate introduced in April 2023.

 

Tax credit on adjusting items was £0.1m (H1 2023: tax credit of £2.3m).

 

 

Investment and capital expenditure

 

Capital expenditure was in line with our expectations at £12.1m (H1 2023: £14.3m).

 

The largest component of capex was £9.8m investment in the store estate (H1 2023: £7.7m), of which refits were £3.5m, new stores £3.2m and other store capex across the estate £3.1m. There was £2.3m capex investment in our digital capabilities (H1 2023: £2.8m), as we continue to develop our multi-channel offer.

 

There was a net cash outflow of £5.1m for the acquisition of our 51% stake in Solar Fast.  This comprises the initial aggregate consideration of £7.6m, representing £5.1m for the equity shares, less a £0.2m negative working capital adjustment, plus £2.7m for acquired cash, of which £2.5m cash was repaid by dividend post completion. 

 

We continue to expect capital expenditure for 2024 to be c.£30m driven by continued investment in the store estate and further IT capital expenditure as we continue to enhance our operating systems and customer experience. In addition we expect to invest c.£10m in SaaS IT projects, which will be expensed through the income statement.

 

 

Cash / net debt

 

Cash at the end of the period was £152.4m (H1 2023: £190.0m), in line with our expectations. This cash balance is stated after the execution of £11.3m of share buybacks and the acquisition of a 51% controlling stake in Solar Fast.

 

Operating profit increased year-on-year, resulting in cash flows from operations of £89.5m (H1 2023: £89.8m). Cash inflows related to working capital movements were £64.9m (H1 2023: £87.0m), reflecting our normal seasonal trading pattern of trading peaks in both Retail and Design & Installation occurring in the first half of the year.  Cash outflows from financing activities of £83.7m (H1 2023: £76.5m) include £51.6m (H1 2023: £57.8m) related to lease liabilities, £20.0m dividend payments (H1 2023: £18.4m) and £11.3m of share buybacks (H1 2023: nil).

 

Inventories decreased slightly to £195.1m (H1 2023: £201.9m) in line with our expectations.   

 

IFRS16 net debt increased to £548.6m (H1 2023: £480.9m), primarily reflecting the lower cash balance year-on-year.

 

 

Dividend

 

The Board has recommended an interim dividend of 3.6p per share, which will be paid on 8 November 2024 to shareholders on the register at the close of business on 4 October 2024.

 

The shares will be quoted ex-dividend on 3 October 2024. Shareholders in the UK may elect to reinvest their dividend in the Dividend Reinvestment Plan (DRIP). The last date for receipt of DRIP elections and revocations will be 18 October 2024.

 

 

 

Technical guidance

 

The following represents unchanged guidance for the full year 2024:

 

•	Net interest costs of £20m-25m
•	Adjusted tax rate 25-26%
•	Capex of c.£30m19
•	Current £25m share buyback programme expected to be completed by end September 2024
•	Based on current expectations full year dividend expected to be maintained at 10.9p
•	Cash at FY 2024 expected to be lower than at FY 2023 as a result of ongoing share buyback and Solar Fast acquisition

 

 

 

Appendix

 

LFL sales growth	Retail	Design & Installation	Total
Quarter 1 (13 weeks to 30 March)	1.7%	(17.6)%	(3.3)%
Quarter 2 (13 weeks to 29 June)	(0.2)%	(18.9)%	(4.4)%
Half year  (26 weeks to 29 June)	0.6%	(18.3)%	(3.9)%

 

The phasing impact of the Easter peak trading period this year reduced Retail LFL sales in Q2 by 1.4%. 

 

 

 

Risks and Uncertainties

Wickes has a formal risk management process to help the Group reinforce its short, medium and long term success, safeguard value and enable it to meet and exceed the expectations of stakeholders. 

 

A detailed explanation of the risks and uncertainties which were identified for 2023 can be found on pages 75 to 81 of the Annual Report and Accounts 2023.  The principal risks and uncertainties comprise:

 

•	Cyber and data security	•	Climate change
•	Business change	•	People and safety
•	Brand integrity and reputation	•	Commercial and supply chain
•	Legal and regulatory compliance	•	Financial management
•	IT operations	•	Customer experience
•	Growth strategy	•	Stores, distribution and installations

 

The Board continues to review changes to risks and uncertainties that may arise, remaining mindful of the external environment. 

 

 

Footnotes

 

1) The enterprise value of the 51% stake in Solar Fast was £5.1m.  A further payment was made of £2.7m, representing Wickes' 51% of the cash acquired on completion, of which £2.5m was subsequently repaid by way of dividend. 

2) Retail refers to the revenue stream formerly described as Core. Retail revenue relates to products sold directly to customers (both DIY and local trade), in stores or online. 

3) Source: GfK GB point of sale data, sourced from GfK DIY Category Reporting June 2024. 

4) For a definition of like-for-like ('LFL') sales, see note 3. 

5) Active members of the TradePro scheme are defined as those who have shopped with us in the last 12 months. 

6) Sales of Wickes Lifestyle Kitchens which include a design element are classified as Design & Installation revenues, whereas Self Serve purchases of the Wickes Lifestyle Kitchen range are classified as Retail revenues.

7) Design & Installation refers to the revenue stream formerly described as DIFM or Do-it-for-me. Design & Installation revenue relates to projects such as kitchens and bathrooms, sold by our showroom Design Consultants. Revenue is recognised when delivery and installation (where applicable) is complete.

8) Delivered sales refers to the revenue which is recognised when the Group has satisfied its performance obligation to the customer and the customer has obtained control of the goods or services being transferred. 

9) Consensus PBT for FY24 is £40.4m as at 19 August 2024. 

10) For details of the prior period re-presentation, see note 2. 

11) Adjusted measures represent results on an IFRS basis and exclude adjusting items including, but not limited to, significant restructurings, incremental costs relating to corporate transactions, significant write downs or impairments (or impairment reversals) of current and non-current assets, the associated costs of separating the business from the former parent company's IT systems, net unrealised gains and losses on remeasurement of foreign exchange derivatives held at fair value and the effect of changes in corporation tax rates on deferred tax balances. See note 2 of the financial statements and both the Reconciliation of Alternative Performance Measures note and the Alternative Performance Measures note for a detailed explanation of these items.

12) Source: GfK, Mintel and Wickes estimates. 

13) Source: Mintel UK DIY Retailing report, June 2024. 

14) ONS Energy efficiency of housing in England and Wales 2023. 

15) Decarbonising Buildings: Insights from Across Europe, published by the Grantham Institute - Climate Change and the Environment at Imperial College London, December 2022. 

16) Based on a sample of c.15,000 customers. 

17) Ordered sales refers to the value of orders at the point when the order has been agreed. 

18) Source: Wood Mackenzie UK PV Capacity Forecast. 

19) Excludes impact of expensed SaaS IT investment costs.  These are the costs incurred which relate to 'software as a service' solutions that are immediately expensed under the Group's accounting policies and do not result in an intangible asset.