Wickes Group Plc · LSE:WIX
Wickes — Investor Presentation (March 2021)
46 slides from Wickes's investor presentation, Mar 26, 2021
Slide 1: Digitally-led, Service-enabled, Home improvement business
Digitally-led, Service-enabled, Home improvement business Market update | 26 March 2021 Strictly Private & Confidential
Slide 2: Today's agenda
Today’s agenda Update on Wickes 01 David Wood Page 3 Operational learnings 2020 02 Fraser Longden Page 13 Financial framework 03 Julie Wirth Page 22 Levers for growth 04 David Wood Page 33 Next steps / Q&A 05 David Wood Page 42 Wickes 2
Slide 3: Update on Wickes
Update on Wickes David Wood a
Slide 4: A compelling investment case
A compelling investment case Our purpose: to help the nation feel house proud Distinctive and hard to replicate customer- Uniquely balanced Low cost and flexible Proven levers Strong cashflow led proposition business operating model for sustainable funding investment and growth shareholder returns U
Slide 5: Business overview 2020
Business overview 2020 £25bn 1.9% market market CAGR(a) £1.35bn revenue 4.8% Core: £1.1bn 18.8% LFL revenue CAGR(a) DIFM: £0.3bn (27.8)% LFL ~2/3 ~550k sales digitally-led TradePro members >26,000 ~8000 installations colleagues (a)7 years CAGR 2013-2020 Wickes 5
Slide 6: Consumer trends have compounded through 2020
Consumer trends have compounded through 2020 Customer trend Convenience / speed Value / quality Digital growth Desire for better homes What this means for home improvement? Simple ranges / ease of choice Clear, simple pricing Transparency, price, Growth of ‘Do It For Me’ stock, range Small store for
Slide 7: Customer needs
There remain three distinct customer routes to complete projects Local Trade DIFM DIY Extension Loft conversion Driveway Bathroom Kitchen Tiling Painting Hang a shelf Gardening Wickes – same end consumers, same stores, same product offering High skill/cost Low skill/cost Speed – save time Inspiratio
Slide 8: Wickes operates in a large and growing market
Wickes operates in a large and growing market 1.9% £25bn 2020 performance £22bn 2.5% The DIY category grew in 2020 CAGR during lockdown. Increased % mix of the overall market 1.8% DIFM categories were 3.6% impacted by short term showroom closures 2.7% Local trade also impacted short term by lockdown
Slide 9: Market growth is underpinned by robust fundamentals
Market growth is underpinned by robust fundamentals Property transactions drives higher value projects and Ageing housing stock drives need for home improvement boosted by stamp duty incentive 4,906 4,872 4,369 3,738 2,489 1,959 2,080 Pre-1919 1919-44 1945-64 1965-80 1981-90 1991-2002 Post-2002 Dec-
Slide 10: A clear framework to win
A clear framework to win Vision A Wickes project in every home Mission To be the partner of choice for Home Improvers and Local Trade Purpose To help the nation feel house proud 01 Local Trade 02 Do it for me (DIFM) 03 DIY Customer From trade-trusted brands to always From concept to completion, plus
Slide 11: Our 2020 growth journey
Our 2020 growth journey Ordered LfL Sales Growth (%) National Lockdown 2 Core reopening growth (weeks 46 to 49) with Core Lockdown 1 remaining at +25% YoY Lockdown 2 of over +40% YoY Lockdown impact with no K&B Sales and ‘light’ operating model for Core Strong start to the year K&B improvement bette
Slide 12: Wickes has consistently grown digital share ahead of key competitors
Wickes has consistently grown digital share ahead of key competitors Web Traffic Source: SimilarWeb traffic analytics Wickes 12
Slide 13: Operational learnings 2020
Operational learnings 2020 Fraser Longden
Slide 14: An efficient and integrated model underpins the value proposition
An efficient and integrated model underpins the value proposition Curated Digitally-led Distinctive service Low cost, right-sized Simple, clear pricing product ranges model providing physical estate offering value to inspiration, service customers and fulfilment Key topic areas today Wickes 14
Slide 15: Unprecedented Digital Growth in 2020
Unprecedented Digital Growth in 2020 Key observations Customers are Approaching two thirds Digital customers almost Digital customers acquired Additional database demanding more of sales are digitally-led doubled in 2020 in 2020, are behaving creates rich source of data digitally-led propositions co
Slide 16: Significant growth in Click and Collect and Home Deliveries in 2020
Significant growth in Click and Collect and Home Deliveries in 2020 Key observations YoY % growth across Click and Collect and Home Deliveries Lockdown 1 Lockdown 2 Activity spiked during lockdowns During the 4th period: Nearly 1m C&C >350K Home Deliveries Average week: 73,000 C&C, 450% growth 45,00
Slide 17: The 4C Service Model flexed to enable digital growth
The 4C Service Model flexed to enable digital growth Order fulfilment Do It For Me Technology developments Assisted Selling Order Fulfilment Additional storage space Improvements in stock accuracy routines Other developments Evolved format blueprint Self Serve COVID Secure measures Park and Collect
Slide 18: Innovation with DIFM during a difficult year
Innovation with DIFM during a difficult year Ordered LfL K&B Sales Growth (%) Key observations Lockdown 1: Furlough Lockdown 2 Full Year 96% growth in Lockdown impact with no K&B web enquiries creating 86% Sales and ‘light’ growth in web leads operating model for Core K&B improvement K&B improved to
Slide 19: Commitment to building a sustainable business is at the heart of what we do
Commitment to building a sustainable business is at the heart of what we do Foundations to our Culture Growing Responsibly Inclusion and Diversity Let’s have Let’s plan Let’s make Everyone is welcome Developing skills in our fairness for the future Wickes at Wickes communities through accessible tra
Slide 20: We have achieved a lot on ESG – and further opportunities remain
We have achieved a lot on ESG – and further opportunities remain Achievements Key Targets Everyone is Welcome Developing Skills in our Communities Company target to achieve diversity mix that reflects UK Commitment to annually Inclusion and Launched Installer Emissions reduced demographics by 2030 d
Slide 21: Model proven and significant learnings from 2020
Model proven and significant learnings from 2020 Our balanced, low cost and flexible We have adapted well and ahead Digital growth delivered through 4C model has helped us to adapt to of our competitors to the changing service model lockdowns landscape We have learnt new capabilities in DIFM The tea
Slide 22: Financial framework
Financial framework Julie Wirth
Slide 23: Strong financial framework
Strong financial framework Revenue CAGR of 4.8% ‘Right sized’ flexible Strong returns on Cash generative over the last 7 years cost base capital investment Wickes 23
Slide 24: Adjusted headline financial results
Adjusted headline financial results 2018A 2019A 2020A Revenue £1,200m £1,292m £1,347m LfL Revenue (%) (4.1)% 8.7% 5.0% Gross profit £470m £501m £509m Gross profit (%) 39.2% 38.8% 37.8% Selling and administration costs £(394)m £(405)m £(427)m % of sales 32.9% 31.4% 31.7% Operating profit £76m £96m £8
Slide 25: Strong Core growth with DIFM constrained by COVID restrictions
Strong Core growth with DIFM constrained by COVID restrictions LfL revenue growth by quarter (%) Total 4.9% (18.9%) 18.2% 20.0% 5.0% LfL (%) Note: Wickes Calendar year-end, reflecting 52 weeks. Wickes 25
Slide 26: Gross profit margin - down 100bps in 2020 influenced by COVID
Gross profit margin - down 100bps in 2020 influenced by COVID 2020 Influences ‘Normalised’ Distribution operational leverage Ongoing benefit Positive Lower promotional participation Reverses Lower local trade participation Reverses Neutral Change in DIFM participation Increasing services mix at lowe
Slide 27: Cost / sales ratio - up 40bps in 2020
Cost / sales ratio - up 40bps in 2020 2020 Influences ‘Normalised’ In-store operational leverage Ongoing benefit Positive Lower costs Ongoing benefit COVID secure operations Partial unwind Negative Unproductive workforce (DIFM) Reverses Wickes 27
Slide 28: Drivers of operating profit in 2020
Drivers of operating profit in 2020 Profit for 2020 excludes any government support on Furlough/Business Rates and has been subsequently repaid (7) (9) (4) (3) (2) 59 (48) 96 82 48 2019 Operating DIFM Core Lockdown Covid Covid Costs Closure Costs Store Investment Other 2020 Operating Profit Performa
Slide 29: Capital investment (excluding leases) constrained through 2019 and 2020
Capital investment (excluding leases) constrained through 2019 and 2020 (£m) 2018A(1) 2019A 2020A Future capex New space 3.9 0.8 - Minimal Refit 19.7 12.7 11.0 Increasing Refit investment IT / Digital 4.5 4.5 2.9 Continue Range development 2.3 0.2 3.4 Increasing DIFM investment Other 6.8 5.9 1.0 Min
Slide 30: Our capital allocation priorities
Our capital allocation priorities Strong cash generation Strong cash generation FTE Design consultants Investment in organic growth Maintaining a strong Progressive dividend policy and innovation balance sheet Starting with a 30% payout ratio of adjusted post-tax profit Wickes 30
Slide 31: Technical guidance
Technical guidance Balance Sheet & Cash Income Statement Net cash from Travis Perkins of £130m Demerger costs of £5m Committed RCF of £80m IT separation cash costs of c.£40m over 2 years (adjusting item) Opening IFRS 16 lease debt of £790m Incremental PLC and share-based costs of £7m on FY basis Cap
Slide 32: Outlook
Outlook Current Trading Performance trends in second half of 2020 have continued into the current financial year Strong Core sales seen in the second half of 2020 continue DIFM orders were c. 50% lower year-on-year through the key winter sale period, as showrooms remain closed Whilst sales remain ro
Slide 33: Levers for growth
Levers for growth David Wood a
Slide 34: Research confirms underlying growth in all sectors
Research confirms underlying growth in all sectors Pandemic provides Customer dynamics indicate Resilient demand for momentum for further higher level of DIY set Local Trade DIFM growth to continue 87% of Trade anticipate their 90% expect to do the same or £125bn of ‘excess’ consumer workload will e
Slide 35: Millennials have the potential to drive future DIY sector growth
Millennials have the potential to drive future DIY sector growth Percentage who agree with the following statements Key observations Overall 18 - 34 35 - 54 55+ 80% of millennials are expected to spend more (or I have purchased the same) on home improvement in 2021 vs 2020 more home improvement 46%
Slide 36: Wickes operates in a large and growing market
Wickes operates in a large and growing market 1.9% £28bn 2.5%+ £25bn 2.5% CAGR £22bn CAGR The DIY category grew The DIY market now has in 2020 during lockdown. platform for continued Increased % mix of the 1.8% overall market growth… DIFM categories were …with consumer trends 3.6% impacted by short
Slide 37: Wickes has the right growth levers to win
Wickes has the right growth levers to win Vision A Wickes project in every home Mission To be the partner of choice for Home Improvers and Local Trade Purpose Helping the nation to feel house proud Levers of Growth 01 02 03 Customer Winning for Trade Accelerating DIFM DIY Category Wins proposition G
Slide 38: Accelerating DIFM through extending our services
Accelerating DIFM through extending our services Extension opportunities Loft conversion Patios Flooring and Tiling Doors and Windows Home Office - Stage 2 In Store Trial (and Associated Carpentry) Landscaping Driveways Launched in Q1 Launched in Q1 Launching H2 ‘From concept to completion, plus all
Slide 39: Leveraging digital capability & data to drive growth
Leveraging digital capability & data to drive growth More engaged audience Huge growth in digital customers Increased loyalty Driving greater visibility of store shoppers Higher retention rates Launch of DIY app in Q2 Data Outcome Insight Mission based communications Enriching first party data with
Slide 40: Store refits will continue to enhance returns
Store refits will continue to enhance returns Stores today Key initiatives Stores tomorrow Potential 35-40 refits to go Fully modernised estate >100 refits Right sized format 60% uplift in DIFM sales 5-7 relocations Fulfilment 15% uplift in Core sales 15-20 downsizes 5 year refresh cycles >25% retur
Slide 41: A compelling investment case
A compelling investment case Our purpose: to help the nation feel house proud Distinctive and hard to replicate customer- Uniquely balanced Low cost and flexible Proven levers Strong cashflow led proposition business operating model for sustainable funding investment and growth shareholder returns U
Slide 42: Next Steps / Q&A
Next Steps / Q&A a
Slide 43: Next Steps and Key Dates
Next Steps 01 15 April 2021 Q1 Trading Update and Key Dates 02 27 April 2021 Travis Perkins plc AGM 03 28 April 2021 Targeted demerger for Wickes 04 Mid July 2021 H1 Trading Update 05 Mid September Interim Results Wickes 43
Slide 44: Appendix
Appendix a
Slide 45: Research indicates underlying growth in all sectors
Research indicates underlying growth in all sectors COVID impact provides Customer dynamics suggest Resilient demand for momentum for further higher level of DIY set to Local Trade DIFM growth continue 87% of Trade anticipate their workload will £125bn of ‘excess’ 90% expect to do the same or either
Slide 46: Disclaimer
Disclaimer NOT FOR RELEASE, PRESENTATION, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, DIRECTLY OR INDIRECTLY, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. This presentation has been prepared by Wickes and