WICKES GROUP PLC: Full Year ResultsSource: EQS
for the 52 week period to
Record sales and further market share gains; well-placed to continue to outperform the market
Capital Allocation Policy
Current Trading & Outlook
In the first 11 weeks of 2023 trading has been in line with our expectations. Core sales are moderately behind the same period last year, with Trade sales in growth and DIY continues to normalise. In DIFM, delivered sales are slightly ahead year on year due to the elevated order book; ordered sales are in line with the same period in 2022.
Whilst we are mindful of the macroeconomic backdrop, we remain confident in our ability to drive further market share gains given the strength of our proposition and improvements we have made to our offer. We have efficiency plans in place which will offset inflationary pressures in 2023, with the exception of energy costs which as previously indicated will be
“This was a period in which we achieved record sales and made further market share gains. While profit declined, the outcome is still significantly ahead of the pre-Covid period. Our performance was underpinned by our balanced business model, digital leadership and ability to offer the best value and service across Trade, DIFM and DIY. This has been achieved due to the expertise and dedication of our 8,100 colleagues, and I would like to thank each of them for their support over the last 12 months.
“Like all businesses we remain watchful of the external consumer environment. However, we have the right strategy and a compelling offer for customers, and look to the future with confidence. We will continue to invest across our distinctive growth levers, and are well-placed to achieve further market share gains.”
Summary of full year financial results
*Adjusted measures represent results on an IFRS basis and exclude adjusting items which comprise significant restructurings, significant write downs or impairments of current and non-current assets, the costs of demerging and listing the business, the associated costs of separating the business from the Travis Perkins Group’s IT systems, the impact of unrealised fair value movements on derivatives through the profit and loss statement, VAT reclaim and the effect of changes in corporation tax rates on deferred tax balances. These measures have been explained, reconciled and calculated in note 5. Adjusted revenue excludes the
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Wickes Headland +44 (0) 0203 805 4822
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Wickes is a digitally-led, service-enabled home improvement retailer, delivering choice, convenience, value and best-in-class service to customers across the
Wickes operates from its network of 230 right-sized stores, which support nationwide fulfilment from convenient locations throughout the
Forward looking statements
This announcement may include statements that are, or may be deemed to be, forward-looking statements. By their nature forward-looking statements involve opportunity, risk and uncertainty since they relate to future events and circumstances, and actual results may differ materially. Any forward-looking statements in this announcement reflect management's view with respect to future events as at the date of this announcement.
Wickes achieved record sales in 2022, benefitting from its market-leading value proposition and underpinned by its uniquely balanced business model. Despite lower market volumes we maintained our long track record of achieving market share gains in our Core business, with the acceleration in the growth rate of our TradePro customer base a particular feature. DIFM ordered sales recovered as the year progressed; delivered sales benefited from the unwind of the order book and came close to matching the level in 2019 on a like-for-like basis.
2022 proved to be a challenging year for the market, driven by well-documented challenges facing the consumer. The need to combat rising inflation has seen
Despite this softer economic environment, which we expect to continue in 2023,
We continue to believe that behavioural changes post Covid remain supportive. Many businesses have retained hybrid working practices, increasing time spent at home, fuelling further desire for homeowners and tenants to invest in their properties. While some DIY activities were brought forward into the early phases of the pandemic, some larger projects - involving our Local Trade and DIFM segments - may have been deferred. The growth of our TradePro customer base showed continued momentum and accelerated in 2022, reflecting strong order books across the trade and the increasing importance of value for money in an inflationary environment.
More recently, the sharp rise in energy prices has seen increased focus on the energy efficiency of
In 2022 we launched our interactive Sustainable House Guide, highlighting the measures that can be taken in each room of the house (or garden), with a click through to the relevant products. This complements our online Energy Saving advice guide, and our work with the
The homeowning demographic into which our Local Trade and DIFM end propositions face also leave us well placed to continue to take share, as do our credentials for value, quality and convenience. Although as yet we have seen little sign of trading down or rising own label participation, our surveys tell us that customers are becoming more discerning on price and are shopping around more. We believe that our value credentials, the strength of the Wickes brand, our simple and clear pricing policy, alongside our 10% flat rate discount to all TradePro members, stand us in good stead if market conditions become more challenging.
We are pleased to have made strong operational progress since demerger, reflected in continued growth in Core market share and a strong recovery in delivered DIFM sales.
During the year, we demonstrated the flexibility of Wickes’ operating model, including a number of actions undertaken to respond to more challenging market conditions, and to drive further efficiencies within the business to offset increases in our cost base. Our balanced model gives us the agility to respond to changes in customer demand, leading to efficiencies across both store and distribution centre fulfilment costs.
We have continued to invest in the customer proposition. We refitted another 12 stores in 2022, showcasing our full offer of kitchens and bathrooms, and taking the number in the new format to 162. We continue to see strong returns and sales uplifts in our refitted stores.
Our store refresh programme also continues, with particular focus on the efficiency of multi-channel order pick and despatch, which drives selling densities and underpins our 30-minute click & collect promise. We have added
LFL sales across the Group were up 3.5% despite very tough comparatives in our Core business. Core LFL revenue declined by 2.0%, with the second half stronger as comparatives eased and as sales of energy-saving products helped our DIY category towards the end of the year. During the year we continued to prioritise our price leadership by working closely with our suppliers. We remained committed to managing supply chain inflation responsibly and our selling price inflation has been significantly less than our cost price inflation.
The estimated level of selling price inflation for the full year was 13% (first half 15%, second half 10%), driven mainly by categories such as timber and cement. Inflationary pressures eased in the second half, with the timber price declining year on year, and we would expect this trend to continue into 2023.
Despite the well documented industry shortages in certain categories in the first half, our strong supplier relationships, curated range and operational agility served us well to continue to provide customers with the products they need. Together with our price leadership and own brand credentials, we believe our strong focus on availability helped to drive increased revenues and awareness of Wickes, as reflected in our Core market share gains and the strong performance of TradePro, where both membership and sales increased by almost 20%.
We entered FY 2022 with an elevated pipeline of DIFM orders due to the impact of Covid on the ability of our installation teams to deliver projects in the final quarter of 2021. Despite moderately lower orders over the course of the year, the successful work through of the order book resulted in LFL delivered sales increasing by 26.1%. Although there was some disruption in the first half relating to Covid and the supply of appliances, these issues faded as the year progressed.
There was another strong performance in bathrooms, where new ranges in sanitaryware and accessories, and a wider range of pricing options, have helped to broaden our appeal. Refitted stores also continue to perform strongly in DIFM due to the welcoming nature of new showroom displays.
We noted in our July trading update that DIFM orders had slowed in early summer, as customers were taking longer to commit to big ticket purchases. However, the pace of order decline moderated into Q4, and in the first 11 weeks of 2023 ordered sales are in line with the same period last year.
At the end of 2022, the order book was below the prior year, although still ahead of pre-Covid levels. Given improvements in product availability and labour scheduling, we would expect the order book to return to more normal levels by the end of 2023. This will result in delivered sales being above ordered sales for the year, although this is expected to stabilise in 2024 and beyond.
Winning for Trade
Our TradePro membership scheme showed increasing momentum in the period. We enrolled 112,000 customers in the year, taking its total membership to 746,000 as we continued to grow the awareness and appeal of the scheme through its compelling proposition. Our local trade customers indicate that they are increasingly conscious of rising material costs and are switching to Wickes for its strong value credentials and simple discount scheme. We also believe the recent addition of 30 minute click-and-collect to our offering has increased the attraction of the scheme during a period where tradespeople are finding ways to most efficiently use their time whilst balancing full order books.
We are encouraged that the TradePro members joining the platform during the year have adopted characteristics in line with previous cohorts using the platform. Sales from TradePro customers in the year increased by 19% compared to 2021. Our TradePro customers continue to represent strong strategic value to Wickes in terms of average order value and frequency of visit, and we have plans to evolve our offering in 2023 to drive further loyalty and engagement.
To this end, we are encouraged that the results of our February Mood of the Nation survey showed that 45% of tradespeople have a pipeline of work for over three months. Although this is moderately down on the prior year, it remains healthy by historical standards.
Developing our digital expertise and continuous innovation of our product range continues to be a key focus within DIFM. During the year we completed the major refresh of our kitchen ranges initiated in Autumn 2021, introducing a number of new ranges and trending colourways during the period.
Following the introduction of a completely new bathroom range during the second half of 2021, we continued to introduce new products to our showroom displays. We have also further improved our end-to-end bathroom service by driving greater engagement with our design consultants, supported by focused recruitment of installers with bathroom capabilities. Across kitchens and bathrooms our installer network continues to grow and now stands at 3,000 teams of independent contractors (
We continue to see encouraging attachment rates of tiling, flooring and joinery sales to kitchen and bathroom projects, confirming the opportunity to increase overall project spend within the home.
DIY Category Wins
As communicated in our July trading update, following the Jubilee weekend in June, we experienced signs of the DIY market softening from the very high levels of demand experienced during the pandemic. DIY sales continued to underperform Local Trade for most of the second half, although towards the end of the fourth quarter DIY sales started to recover with strong growth in sales of energy-related products such as insulation, smart meters, lighting and draught excluders.
We have 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.
In line with our strategy to capture share in underweight categories, we have grown market share in key segments such as garden and décor following recent range reviews. This has included the roll out of our new Crown colour emulsion paint range to support greater customer choice across different price points. The continued growth of our extended online range continues to support range depth whilst our curated range in store lends itself to high stock turn and limited exposure to highly seasonal lines and markdown activity across the wider sector.
Within our ready-to-fit kitchen offer, we have launched six new ranges as part of a rebranding of this offer to
Despite the unwinding of Covid influences we have continued to grow the proportion of our digitally-enabled sales on a year-on-year basis. We completed a number of enhancements to our digital capabilities in the year, including greater use of push messaging, personalisation and targeted campaigns across our digital channels. Underpinned by our predictive Missions Motivation Engine, which is generating identifiable incremental sales, we have also stepped up the digital experience for our trade customers, increasing the levels of engagement throughout the project journey. Increased use of social campaigns and display marketing has also grown the awareness of the TradePro mobile app.
We launched our Wickes eBay store during the year with 4,000 lines, extending our customer reach to a younger audience. We are currently looking at opportunities with marketplace platforms, including eBay, to extend our range accessibility to a wider audience of home improvers. We also now offer
Our digital marketing campaigns have been recognised across the industry with Wickes receiving a number of prestigious awards. At the recent Marketing Week Awards Wickes claimed the coveted
Growing our estate of new format stores
12 store refits were completed during the year, including the downsize and refit of our
Despite the impact of heightened build costs during the year, store investments continue to deliver sales uplifts of 25% and ROCE of over 25%. Sales increases by category are very consistent, with over 50% uplift in DIFM sales and around 10% in Core. We will continue our refit programme in 2023, where possible tied to lease renewals.
Our property team is continuing to review and stress test a number of white space catchments and we remain confident on the opportunity to expand into 20 new locations over the next five years. Our first new store for some time opened in
Following initial mobilisation during the previous financial year, 2022 saw good progress with the transition of technology and processes from our previous parent Travis Perkins plc. The second half of the year saw new Finance and HR systems go live, plus a successful migration of our office collaboration platform. We remain focused on delivery of the separation of the IT infrastructure in 2023 as planned. All aspects of the programme continue to be overseen by the Wickes Executive and PLC Boards who monitor delivery and any operational risk arising.
Responsible Business Strategy update
In 2022, we launched our new Responsible Business Strategy, Built to Last and this has been a year of strategy development, target setting and action planning, with significant progress made across all three pillars of the strategy.
Inclusion and Diversity remains central to our people strategy. Our ‘Feel at Home’ Inclusion & Diversity programme continues to go from strength to strength and receive national recognition and awards. We were recently recognised as the no.1 retailer in Stonewall’s Top 100 UK Employers List 2023, ranking no. 11 in the overall list of public, private and third sector employers. We have also been included again within the Financial Times Diversity Leaders report, ranking as a top five retailer.
As our charity partnership comes to an end in
We have worked hard over the last year to embed climate change and sustainability across the business. For our first-ever CDP (
Towards the end of last year we launched our near-term Science Based Targets, which are: to reduce absolute scope 1 and 2 emissions by 42% by 2030 (from a 2021 base year); for 45% of our suppliers by emissions covering purchased goods and services to have science-based targets by 2027; and to reduce scope 3
In line with our purpose to make the nation feel house proud, we want to help customers feel proud of their homes for saving energy and protecting the environment. To that end, we are focused on providing customers with a broad range of sustainable and energy efficient products and services to achieve long term decarbonisation targets and short term relief on the cost of living. In FY2022 we introduced our ‘Energy Saving Advice’ pages on our customer website, in conjunction with the
We are pleased to report another period of sales growth and market share gains in Core (source: GfK). This builds on our long term track record of growth, which reflects the effective business model and the investments we have made in our digital and service propositions. LFL sales for FY2022 were ahead by 3.5%, with a strong finish to the year in DIFM delivered sales, and, within Core, strong Local Trade sales over the year. Adjusted operating profit declined moderately from the record high of 2021, with a lower adjusted gross margin as a result of inflation and mix factors, plus higher P&L investment costs in areas such as distribution, refits and IT.
Adjusted profit before tax also declined, despite reduced interest costs which were primarily a result of lower leasehold debt. Note that from FY2022 onwards we will be excluding unrealised gains and losses from forward currency contracts from adjusted profit before tax, as these can potentially be material, are non-cash and do not reflect underlying business performance.
Statutory profit before tax also declined, reflecting the reduction in adjusted profit before tax, a full year of IT separation costs, and a right-of-use asset impairment charge. The business was broadly cash neutral in the year, other than the expenditure on IT separation.
Adjusted revenue for the 52 weeks to
Core revenue, encompassing Local Trade and DIY segments, declined by 3.8% to
On a three-year basis, Core LFL sales growth was 33.0%, driven by growth in Trade sales as our TradePro business goes from strength to strength. Looking ahead, the three-year comparatives become less meaningful as the base year will include the first Covid lockdown, so this measure will no longer be provided.
Core sales performance was strongest in a number of areas which have seen specific range reviews and product development, such as garden, decorative and
Selling price inflation for the full year was 13%, moderating as the year progressed. In the first half, inflation was 15% (H1 2021 3%), as we experienced the full impact of Covid recovery and the war in
Our trading strategy remains to be very competitive on price (even before the 10% TradePro discount), and in 2022 our selling price inflation was significantly less than cost price inflation. Historically this strategy has helped to drive market share gains.
This unprecedented level of price inflation had several implications. Firstly, industry volumes came under pressure, as consumer spending could not grow in cash terms as fast as inflation. Our own volume performance, excluding mix effects, declined by 15% in 2022, although this improved sharply as the year progressed and in the fourth quarter was down by less than 5%.
Secondly, our customer surveys show an increasing focus on value for money and shopping around, especially using digital channels. Projects that have been priced to a budget may be at risk unless inflation can be managed out of raw materials inputs. TradePro gives the trade the opportunity to lower the cost of their materials, and we believe this is one reason why our TradePro customer growth has accelerated in 2022. As yet, however, we have not seen a marked increase in the proportion of Wickes branded products within the mix, although we are well placed to benefit if this does materialise. Finally, as outlined below, inflation affects both gross margin and cost ratio measures.
DIFM delivered sales were
DIFM orders in value terms were slightly down year-on-year, although the trend improved over the course of the second half. Orders have been particularly strong in new designs, both in kitchens and bathrooms, and the attachment rate (flooring, tiling, doors) continues to rise. Our credit offer, currently at 4.9% APR, remains very attractive. Cancellations remain at low levels.
At the end of 2022, the order book was below
Taken together, our growth levers have contributed to a 27% improvement in sales per square foot since FY2019. For FY2022, this metric improved from
Adjusted gross profit
Adjusted gross profit for the full year was
Mix effects between Core and DIFM had a limited impact on gross margin. Inclusive of installation revenue, DIFM overall gross margin percentage is similar to that within Core.
Distribution costs, taken within gross profit, were flat as a percentage of sales. Despite inflation in related cost areas, some of these costs are volume, not value linked, allowing some improvement in ratios. The proportion of in-store sales also increased, with online sales falling back slightly as trading patterns normalised post pandemic.
Adjusted operating profit
Adjusted operating profit was
The adjusted operating profit margin was 6.7%, down from 7.6% last year. The majority of the reduction was driven by the decline in the adjusted gross margin, as noted above.
The cost to sales ratiodeteriorated by 20bps. Selling costs were broadly flat, with cost inflation offset by lower transaction numbers and elimination of the final portion of Covid costs. Adjusted administration costs were up moderately, with increases in IT, Support Centre salaries, and annualisation of PLC costs more than offsetting a lower bonus pool.
Net finance costs
Adjusted net finance costs were
Adjusted profit before tax
After finance costs adjusted profit before tax for the full year was
Adjusting items within revenue represent the
Pre-tax adjusting item charges for full year 2022 were
Profit before tax
Profit before tax in full year 2022 was
Tax for the period is charged on profit before tax, based on the forecast effective tax rate for the full financial year. The underlying effective tax rate (before adjusting items) for the 52 weeks ended
Tax on adjusting items in full year 2022 was
Capital expenditure in FY2022 totalled
The main components were
We expect FY2023 capital expenditure once again to be
Cash / net debt
Net cash as at
The inventory position of
IFRS 16 net debt reduced to
On a last twelve month basis, IFRS 16 leverage was 2.90x compared with our target of being consistently below 2.75x.
The Board has declared a final dividend of 7.3p per share, in line with prior guidance, which will be paid on
The shares will be quoted ex-dividend on
Capital allocation policy
The company plans to announce a revised capital allocation policy at the time of its Q2 trading update in July.
Updated technical guidance
The following represents full year guidance for FY2023:
Adjusted EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation and before adjusting items. Adjusting items are defined as those items of income and expenditure that are material in size or unusual in nature or incidence, and in the current year such items relate to separation and demerger costs and certain store impairments, as set out in more detail in note 5. Removal of such adjusting items allows the reader to understand the impact of these non-recurring items separately from the performance of the underlying business.
Consolidated income statement and other comprehensive income
Consolidated balance sheet
* For the year ended
The consolidated financial statements of
Chief Executive Officer Chief Financial Officer
Consolidated statement of changes in equity
Consolidated cash flow statement
1 General information and accounting policies
The Group’s principal accounting policies are set out in the Annual Report and Accounts, which is available from
2 Statutory accounts
The financial information set out above does not constitute the company's statutory accounts for the financial years ended
Whilst the financial information included in this announcement has been computed in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 this announcement does not itself contain sufficient information to comply with international accounting standards.
The Group has one operating segment in accordance with IFRS 8 ‘Operating Segments’, which is the retail of home improvement products and services, both in stores and online.
The Chief Operating Decision Maker is the Executive Board of Directors. Internal management reports are reviewed by them on a regular basis. Performance of the segment is assessed based on a number of financial and non-financial KPIs as well as on profit before taxation.
The Group identifies two distinct revenue streams within its operating segment which are analysed below.
Both revenue streams operate entirely in the United Kingdom. The Group’s revenue is driven by a large number of individual small value transactions and as a result, Group revenue is not reliant on a major customer or group of customers.
Calculating like-for-like revenue enables management to monitor the performance trend of the business period-on-period. It also gives management a good indication of the health of the business compared to competitors.
Like-for-like revenue is a measure of sales performance for two successive periods. Stores contribute to like-for-like revenue once they have been trading for more than twelve months. Revenue included in like-for-like revenue is for the equivalent times in both periods being compared. When stores close, revenue is excluded from the prior period figures for the months equivalent to the post closure period in the current period. These movements are explained by the Network change amounts. The Network change number varies year on year as it represents a different number of stores.
Other movements (week 53) reflects that the period ended
4 Net finance costs
The net unrealised gains on remeasurement of foreign currency derivatives relate to the movement in the fair value of foreign currency forward contracts. No hedge accounting is applied and all movements in the fair value of derivatives are recognised in the income statement as net finance costs.
5 Adjusting items
Adjusting items are those items of income and expenditure that, by reference to the Group, are material in size or unusual in nature or incidence and that in the judgement of the Directors should be disclosed separately on the face of the financial statements to ensure both that the reader has a proper understanding of the Group’s financial performance and that there is comparability of financial performance between periods.
Items of income or expense that are considered by the Directors for designation as adjusting items include, but are not limited to, significant restructurings, significant write downs or impairments of current and non-current assets, the costs of demerging and listing the business, the associated costs of separating the business from Travis Perkins Plc’s IT systems, the effect of changes in corporation tax rates on deferred tax balances, net gains on remeasurement of derivatives at fair value, and in the current period a VAT reclaim relating to overpaid output VAT in prior periods.
Demerger related costs
Demerger related costs are the costs incurred during the process of demerging the Wickes business from
Right-of-use asset and property, plant and equipment impairment charges and reversals
In the period ended
In the period ended
In a portfolio of stores there will be, from time to time, impairments rising on certain specific stores that do not arise from a broader macro economic condition but arise from underlying trading performance. Such impairments are therefore included within adjusted profit. In the current period, no impairment charges (53 weeks ended
IT separation project costs
IT separation project costs are the costs incurred to enable the
Net unrealised gains on remeasurement of derivatives at fair value
During the period, the high level of foreign exchange rate volatility created significant fluctuations in the gains and losses relating to derivatives at fair value. Recognising that these movements would have distorted the trading result due to factors outside of management’s control, and that they may reverse in future periods, a decision was made to treat these unrealised gains and losses as adjusting on an ongoing basis.
An unrealised gain of
Output VAT reclaim
A claim for output VAT overpaid during the period from Q3 2018 to Q4 2021 was lodged with HMRC in
Deferred tax rate change
The tax charge includes an adjusting credit of £nil (53 weeks ended
The differences between the total tax charge and the amount calculated by applying the standard rate of UK corporation tax of 19.0% (53 weeks ended
The tax charge includes an adjusting credit of £nil (53 weeks ended
The effective tax rate for the period is 20.8% (53 weeks ended
The underlying effective tax rate (before adjusting items) for the 52 weeks ended
7 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the 52 week period ended
For dilutive earnings per share, the weighted average number of ordinary shares in issue is adjusted to include all dilutive potential ordinary shares arising from share options.
The Directors believe that EPS excluding Adjusting items (“Adjusted EPS”) reflects the underlying performance of the business before the impact of unusual or one off events and assists in providing the reader with a consistent view of the trading performance of the Group.
Reconciliation of profit after taxation to profit after taxation excluding Adjusting items (“Adjusted profit”):
8 Movement in net debt
During the 53 weeks ended
In the period prior to demerger, a dividend payment of
The dividend paid to
A final dividend of 7.3p is proposed in respect of the 52 weeks ending
Shareholders may elect to reinvest their dividend in the Dividend Reinvestment Plan (DRIP). The last date for receipt of DRIP elections and revocations will be
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The issuer is solely responsible for the content of this announcement.
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