Wickes Group H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 20, 2025

Key Takeaways

  • Retail outperformance: Retail revenue rose 1.9% with market share gains driven by volume growth and Trade Pro sales up 14%, helping deliver an adjusted PBT of £43.6 m and support a maintained 7.3 p final dividend alongside a new £20 m share buyback.
  • Design & Installation recovery: After more than 18 months of declines, ordered sales returned to year-over-year growth in Q4 2024 and the first 11 weeks of 2025, aided by a unified Wix Kitchens offering, added design consultants, and enhanced scheduling technology.
  • Cost and margin resilience: Productivity initiatives in stores, distribution, energy efficiency, and AI-driven stock forecasting offset significant cost inflation and achieved a 16 basis-point gross margin uplift.
  • Strong cash generation: The business ended 2024 with £86 m of cash (average £144 m), generating positive free cash flow after £26 m of CapEx and returning £41 m to shareholders via dividends and buybacks under a disciplined capital allocation policy.
  • Positive 2025 outlook: Early trading shows continued retail growth and Design & Installation order momentum, with management expecting flat gross margin and wage inflation to be offset by further productivity while expanding new stores and digital capabilities.
AI Generated. May Contain Errors.
Earnings Conference Call
Wickes Group H2 2024
00:00 / 00:00

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David Wood
CEO at Wickes

Good morning, everyone, and thank you for joining us here today, and also for those of you 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 2024 year, as well as highlighting how our distinctive business model and proven growth levers continue to drive market outperformance and present us with great opportunity in the U.K.'s large home improvement market. 2024 has been a good year for Wickes, another year where our balanced business model has helped us deliver a strong performance and outperform the market. In our retail business, the increase in total revenue has been driven by volume growth as we attract more customers, and we have accelerated our market share gains.

David Wood
CEO at Wickes

As we have signposted in our last two trading updates, we are seeing an improved performance in our Design and Installation business, driven by our own actions rather than any uptick in the market. I am also delighted to report an adjusted profit before tax at the upper end of market expectations at GBP 43.6 million. I'd like to take this opportunity to thank all of my fantastic colleagues for their incredible work in delivering these results and, as always, helping the nation feel house proud. It is clear that our continued investment in our proven growth levers is delivering results. We have grown trade process hours by 14% in the year and have made a number of interventions in our Design and Installation value chain, which are working well and have translated into a return to ordered sales growth.

David Wood
CEO at Wickes

We are seeing real gains in productivity as our investments in technology bear fruit, and Mark will share a good example of this with you shortly. Our new store opening and refit plans are driving further sales growth with strong returns. Our resilient performance and confidence in our growth strategy ensures that we continue to deliver attractive returns to shareholders, and I'm pleased to announce that we have maintained our final dividend at GBP 0.073 and will be commencing a new GBP 20 million share buyback. We are a business that is committed to growing responsibly, and it was great to be recognized for all of the work we do as part of our Built to last responsible business strategy, with entry into the FTSE4Good Index earlier this year, along with highly positive sustainability ratings from both CDP and MSCI.

David Wood
CEO at Wickes

At the beginning of 2025, we have seen good trading and continued positive momentum in both retail and ordered Design and Installation sales growth. I'll now hand over to Mark to take you through some of the numbers in more detail.

Mark George
CFO at Wickes

Thank you, David, and good morning, everyone. As David mentioned, we had a strong performance in 2024, particularly in light of the tough trading conditions. On this page, we have some of the headlines. Revenue for the year was GBP 1.54 billion, down 1% versus 2023. Within that, retail was up 1.9%, and Design and Installation delivered sales down 10.5%. Despite the drop in sales and considerable cost inflation, we delivered a resilient profit performance with adjusted PBT of GBP 43.6 million. We continue to operate with a strong balance sheet, ending the year with GBP 86 million of cash, and across the year, we held an average of GBP 144 million. This profit performance and our strong balance sheet have enabled us to continue delivering good returns to shareholders. We've maintained our full-year dividend of GBP 0.109 per share, and we completed the first 25 million share buyback back in September.

Mark George
CFO at Wickes

We'll break out more detail in the next few slides, but here we have a summary of our P&L. Good performance in retail helped to offset the decline in Design and Installation sales that were driven by lower demand for big-ticket items, with the net position being a small decline in total revenue. On gross margin, careful management of pricing and promotions has enabled us to deliver really good positive volume growth, and that positive volume growth gets support from suppliers, and that support helps us to maintain a good gross margin. You can see there we're up 16 basis points, which I think is a good outcome in this kind of tough trading environment. On costs, we managed to largely offset the significant cost inflation with our efficiency initiatives, which will continue to provide benefit for us in the years to come.

Mark George
CFO at Wickes

These initiatives helped us to limit the year-on-year fall in PBT down to GBP 43.6 million. Let's look at some of the P&L drivers in a bit more detail, starting with sales. In the retail side of the business, we delivered another good year of progress, most clearly demonstrated in our market share position, which continued to strengthen, and David will cover this in a bit more detail later. We saw good positive like-for-like growth across the year, driven primarily by the continued success of our TradePro scheme. The number of active TradePro members increased to 581,000, and TradePro sales grew by 14% in the year. As you can see from the table on the right of this chart, this growth in retail like-for-like has encouragingly been driven by volume as we've been managing deflation through the year.

Mark George
CFO at Wickes

We anticipate moving into mild positive inflation during 2025. Overall, for retail, 2024 was another period of encouraging, steady growth. In Design and Installation, our sales performance improved over the course of the year. The best guide to how we're trading at any point for Design and Installation is the value of new orders coming through. For most of the year, ordered sales were in decline, but following a number of actions taken in the business, we saw this decline slow and then move into year-on-year growth in Q4. Revenues are reported on delivered sales, which come with a lag following ordered sales as we work through the order book. As you can see on the chart, the rate of year-on-year decline in delivered sales slowed in the second half as ordered sales started to improve.

Mark George
CFO at Wickes

As we move into 2025, if ordered sales continue to remain in growth, and they have done so far in the first 11 weeks, delivered sales will start moving into growth as well, although not in Q1 because of the time lag. David will talk more about what we've done with our D&I business in a moment, but the encouraging thing is that we believe the move into positive year-on-year growth in orders has been achieved before the market has turned, which means momentum can build as the demand for bigger-ticket items improves. The profit bridge on this slide shows quite clearly the difference between the retail performance and the Design and Installation performance and how that feeds through into profit. As a reminder, in this chart, distribution costs are taken out of margin, and we just show the trading margin.

Mark George
CFO at Wickes

As you can see, we increased the profit from the retail side of the business, and this came from a combination of sales growth and higher margin rates. The decline in Design and Installation sales, of course, has a negative impact on trading profit. However, if the Design and Installation business continues on its more recent positive trajectory, it will no longer be the drag on profitability that it has been in the last couple of years. On costs, we've delivered productivity plans that have broadly offset the cost inflation, which has been considerable in the year, particularly in wages with the significant increases in national living wage levels. Initiatives in distribution, store productivity, energy efficiency, lower shrinkage have all contributed to these savings. It's important to stress that our cost savings are embedded and permanent in the business and therefore support the profitability in future years.

Mark George
CFO at Wickes

They're also designed to support, not detract from, the customer experience, and that's very important to us. To illustrate this point, we thought we'd share an example. In 2022, we implemented a new demand forecasting and stock management system that uses machine learning to predict sales and therefore stock requirements. The benefits of this investment have been building through 2023 and 2024, and what's encouraging is that we're seeing improvements in product availability to customers in store whilst reducing the amount of stock in our end-to-end supply chain. Not only is this stock reduction good for working capital, but it's helped us to reduce the overflow storage capacity we use with third parties by around 70% over two years. It's driving P&L savings as well. A real win-win, improved customer experience and lower cost for the business.

Mark George
CFO at Wickes

Turning to cash, we are a cash-generative business, even at what we think will be the low point in the economic cycle. As you can see on this chart, we generated positive cash flow after the GBP 26 million of CapEx investment invested in the business. Now, this cash flow and our strong balance sheet give us flexibility to invest further in growth initiatives, for example, the acquisition of SolarFast, and to accelerate returns to shareholders. In 2024, we returned GBP 41 million to shareholders in the form of dividends and the completion of the first GBP 25 million of our share buyback program. We ended the year with GBP 86 million of cash. As planned, this was lower than the end of the previous year due to the buyback and the higher-than-policy dividend payout.

Mark George
CFO at Wickes

It's worth noting that our average cash position during the year was considerably higher at GBP 144 million, with December being a seasonal low point in our working capital cycle. Now, this strong cash position is enabling us to continue with our program of accelerated shareholder returns. As a reminder of our capital allocation policy, we have four components to that. We aim to have at least GBP 50 million of cash at the year-end low point. We'll invest into proven growth levers where we can get good returns. We have a target dividend cover range of 1.5-2.5 times, although we're paying above that at the moment, and any excess cash will return to shareholders. We completed the first GBP 25 million buyback in September, and this morning we announced a further GBP 20 million buyback to start in the next few days.

Mark George
CFO at Wickes

Before coming on to Outlook, I wanted to explain a change in the way that we're going to be presenting our revenue segments going forward. Up until now, our Design and Installation revenue was bathroom projects that were sold from our bespoke showroom range, plus any lifestyle projects designed by one of our design consultants. Any lifestyle products that were sold off the shelf without a design have been up until now included in retail sales. In 2024, we started to present our offer to customers a little bit differently. Instead of separate brochures for bespoke and for lifestyle, we now have a single brochure for Wickes Kitchens. We made similar changes to the online journey. Increasingly, customers are shopping between the ranges and actually creating projects from across the range. As a result, we plan to change the way we report revenue.

Mark George
CFO at Wickes

From 2025 onwards, to align with how we run the business internally and how customers are shopping, all sales from both bespoke and lifestyle ranges will be in ourDesign and Installation segment. Our solar installation business will continue to be included in Design and Installation. The table on the right shows the 2024 revenue in both the old and new methodologies, with approximately GBP 80 million of sales moving from retail to Design and Installation. Now, when you look at this table, you might think that the year-on-year movements look a little bit funny. It's because the switch to the new methodology changes the year-on-year % movement for D&I, but not for retail. Now, this is because the GBP 80 million of sales that moves across has a low positive year-on-year growth rate, similar to the rest of retail.

Mark George
CFO at Wickes

When it's taken out, it doesn't change the growth rate of what's left. When, of course, it moves into Design and Installation, which have been in decline, it does affect that number. Got that? Okay. Happy to take questions on that offline. I'll end with some comments on outlook and guidance. So far in Q1, trading has been encouraging. Retail sales remain in year-on-year growth, and in Design and Installation, the momentum from Q4 has continued with year-on-year growth in ordered sales in the first 11 weeks. Due to the lag effect, delivered sales will remain negative in Q1. There is some technical guidance provided on the slide there for you. I won't read those out. To summarize, as we end 2024 and look forward into 2025, the business continues to deliver well in what continues to be a tough trading environment.

Mark George
CFO at Wickes

Retail continues to perform well, and we've seen a marked improvement in Design and Installation. Good cost management has minimized the drop in profit year-on-year for 2024 and will stand us in good stead to grow profit as the wider economic environment improves. This will enable us to continue delivering strong cash generation and good returns to shareholders. With that, I'll hand back to David. I think you might have picked up one of my slides. There we go.

David Wood
CEO at Wickes

Thank you. Teamwork. Teamwork. I'll start by saying thank you to Mark. Thank you, Mark. Look, as I share with you at every results presentation, our growth lever house depicts Wickes' clear, distinctive, and consistent strategy with seven areas of focus to drive growth and market outperformance.

David Wood
CEO at Wickes

Over the next couple of slides, I'll demonstrate the extent to which the levers are working and where we see plenty of headroom for further growth. Before I do that, let me touch on some customer trends that we are seeing across the U.K. home improvement market. As we enter 2025, we are not seeing any dramatic change in terms of consumer attitude and behavior. Likewise, the broad market trends remain in line with my last update in September at the half-year. I said then that overall market trends were heading in the right direction, albeit the external environment remains uncertain. Trade pipelines remain very healthy, and is it any wonder as we have the oldest housing stock in Europe demanding a constant need for repair and maintenance?

David Wood
CEO at Wickes

Over 50% of the tradespeople that we survey in our monthly Mood of the Nation research tell us that they have a pipeline of work over three months, and one in four have a pipeline over 12 months, and these pipelines remain stable. They also tell us they are doing research to ensure best value, and our market-leading price combined with our guaranteed 10% TradePro discount is perfectly suited to this customer behavior. The market for new kitchens and bathrooms remains below historical norms. However, it has stabilized in recent months, and there is no longer a decline in people planning to spend on a new kitchen or bathroom. We continue to see strong demand in the more value-end of the kitchens market, which we target through our Wickes lifestyle range.

David Wood
CEO at Wickes

Turning to the wider home improvement market in the DIY sector, the story of consolidation that really started in 2023 has continued, most recently with Homebase following Carpetright and Wilko into administration. DIYers remain focused on smaller projects such as decorating and garden maintenance. They're spending a little bit less, but still demonstrating a strong desire to improve their homes. These are some of the customer trends that are playing out in the overall home improvement market. However, let's not forget that the U.K. home improvement market is large, and within it, we believe the Wickes differentiated business model is well placed to continue to grow and take market share. I'll now take you through some of the key initiatives that we're undertaking to win in this market. TradePro is the engine room of our retail business, with sales up 14% in the year.

David Wood
CEO at Wickes

As a reminder, these are our most strategically valuable customers, spending on average 10 times more in a year than a typical DIY customer. As explained at our TradePro Capital Markets event last year, we have evolved our focus from total members, which is now well beyond the million mark, to active members, and we now have over 550,000 active members. We continue to expand in the B2B space and have now had partnerships with trade federations such as Checkatrade and SafeContractor, giving us access to new sources of accredited tradespeople. In DIY, our strategic focus is on building new and innovative ranges in core categories, and we're making great strides in this, introducing products that customers love. We've purposely focused on expanding our ranges in those smaller project categories that we know DIYers are doing, categories like garden maintenance, painting, decorating, shelving, storage.

David Wood
CEO at Wickes

Quite an accelerating trend has been acoustic wall panelling. It's proving extremely popular since we launched it during last year. We continue to invest in our digital capabilities to deliver an integrated multi-channel shopping experience for our customers, which is driving online conversion. We have moved at pace to improve our offering on digital payment options. Earlier in the year, we rolled out Google Pay functionality for digital payments to complement our existing Apple Pay offer. Following a successful launch of Klarna in 2023, we have now launched Clearpay in August 2024 as a second buy-now-pay-later option. We use our proprietary and market-leading AI machine learning model, the Mission Motivation Engine, to deliver tailored, personalized value and content to customers to help them complete their home improvement missions. This is driving significant revenues and building customer loyalty and lifetime value.

David Wood
CEO at Wickes

The overall success of these initiatives can be seen in Wickes' accelerating market share, seen here in the top right chart. This has been driven by both strong growth in Trade Pro and gains in the all-important DIY, decor, and garden categories. We continue to broaden the reach of the Wickes brand through product, service, and communications that appeal to a younger and female DIY base. A good example of a product success is the launch of Kimberley Walsh's Wickes own brand paint colours, where her new subtle sage quickly became a top-selling own brand colour. As a result of this intentional drive to shift our customer base, women now account for one in three of our customers from one in six just five years ago. Our retail market share and volume growth drive buying benefits and improve the efficiency and productivity of both our stock and working capital.

David Wood
CEO at Wickes

We can then leverage these benefits to strengthen our value proposition, maintain our market-leading price position, and keep customers happy. A simple, virtuous circle. The impact of all of these things shines through in our customer satisfaction metrics. We are delivering record levels of customer satisfaction, in particular in click and collect and home delivery, where customers have the highest service expectations, and all of this driving an excellent rating on Trustpilot. I'll now turn to our Design and Installations business. In a challenging market, we are very pleased with the progress in overall performance. As I said before, the improvement has been driven by the enhancements we have made to the business rather than any uptick in the market. Mark has already touched on our one kitchen approach.

David Wood
CEO at Wickes

In response to customer feedback, we have simplified the customer journey and now present a unified Wickes kitchen offering rather than segregating bespoke and lifestyle paths. This new unified approach encompasses all marketing assets, brochures, the website, advertising, and promotions. We have further simplified the start of the customer journey by developing new tech that puts the customer in control of that all-important first design consultant meeting. Customers can now book either online or in-store directly into an individual design consultant's diary by store nationwide, finding a time that truly suits them to start the imagining of a new kitchen or bathroom. Sort of think OpenTable for design consultants. In addition, we've added 160 new design consultants and now have 735 across all stores, all increasing customer availability.

David Wood
CEO at Wickes

Our field service management tool provides a technical solution for scheduling installers to make the overall experience as seamless as possible, with our customer experience center ensuring that each customer has their own project manager to help them through the multi-stage Design and Installation process. Of course, we continue to innovate in this space, bringing new furniture, colorways, and appliances to our ranges to ensure we remain on-trend and are offering customers the very latest in kitchen and bathroom design. This is landing really well with customers, and we are seeing strong growth from all of the new products launched in 2024. The recent newcomer to our design installations business is Solar. Wickes Solar is now displayed in all of our stores, and we are seeing above-average conversion on leads when they come via our stores or the Wickes website.

David Wood
CEO at Wickes

This combination of self-help actions has driven improved momentum both in delivered and ordered sales. In the first half of 2024, delivered sales were minus 18.3, which then improved to minus 8.4 in the second half. In the final quarter, we saw ordered sales, a lead indicator of future delivered revenue, moving to positive growth, and this remains the trend. We have plenty more self-help actions in our toolbox with a strong pipeline of innovation and further investment in technology to maintain momentum. I hope that many of you have already seen our new Design and Installation TV ad campaign, which hones in on our purpose to simply help the nation feel its house proud. For those of you that have not seen it, I'm going to run the VT now.

David Wood
CEO at Wickes

That is clever. You know what your sister's going to say, though? Oh, it's lush.

Mark George
CFO at Wickes

You don't mind if I get a matching one, do you? With 70 kitchen styles, find the perfect one for you and feel as proud as a peacock with Wickes.

David Wood
CEO at Wickes

We are definitely feeling proud as peacocks this morning. That's for sure. Look, turning now to our exciting new store opening and refits program. In the last year, we refitted a further seven stores, and now 80% of the estate is in the new format. We've also embarked on a lighter touch refresh program with more to come this year. Our new store opening program is performing well, with four new energy-efficient stores opened in 2024 in Long Eaton, Durham, Aberdeen, and Leamington Spa, creating around 120 new jobs. We have an exciting growth pipeline planned for the coming years as we target an overall estate of around 250 stores over the medium term.

David Wood
CEO at Wickes

For 2025, this will encompass around 10-15 refits or refreshes and five to seven new stores. The new store plan for 2025 includes four former Homebase stores. The great work we're doing as part of our Built to Last responsible business strategy has been recognized by the FTSE for Good, CDP, and MSCI. A few highlights for me would be the rollout of flexible working across the business, providing all store and support center colleagues with greater work-life balance, the supporting of over 2,100 community projects, and finally, the dramatic reduction of our scope one and two emissions, keeping us well on track to deliver our SBTIs. To conclude, 2024 has been another year of good progress. The combination of our business model and growth levers has driven further market share growth despite the challenging environment.

David Wood
CEO at Wickes

Pleasingly, we are starting to see performance improvement in our Design and Installations business. As Mark has outlined, 2025 has started with good trading. With the announcement of a new GBP 20 million share buyback, we continue to deliver attractive returns to shareholders in addition to the dividend. Confidence in our business model, underpinned by our strong balance sheet, drives us to continue investing in our proven growth levers, ensuring we are well placed for faster growth as the economy recovers. Thank you for listening. Mark and I would now be happy to answer any questions you have.

Kate Calvert
Kate Calvert
Analyst at Investec

Morning. Kate Calvert from Investec. A couple for me. The first one is on the lighter touch refits. Can you give a bit more detail on how the economics have changed versus the original sort of refits? The second question is on the store portfolio.

Kate Calvert
Kate Calvert
Analyst at Investec

You obviously closed, I think it was four or five, in the current year. Are there still some stores that need to be resized left? Because you talked about, I think it was about 15 a couple of years ago that still needed resizing. My final question is just on the gross margin. That obviously the underlying gross margin has strengthened. What are your sort of thoughts on gross margin going into the current year? Thanks.

David Wood
CEO at Wickes

Thanks, Kate. Can I tackle some of the first you can underpin? Yeah. We'll go through. Gross margin is definitely yours. In terms of refresh, as we've evolved the estate and now 80% of the estate is in the new format, some of the stores that are in that 80% were developed sort of like five, six years ago.

David Wood
CEO at Wickes

There's an opportunity to go and just have a lighter touch in those stores just to get them up to the sharpest version of the new format now, as we've learned across the course of those five years, particularly in the digital engagement around fulfillment, click and collect, and home delivery. How I'd think about the economics, certainly in terms of the investment economics of a refresh versus a refit. Broadly, a refresh can be anywhere around the sort of like the GBP 400,000-GBP 500,000 mark to refresh a store. A refit typically will be in the range of sort of like GBP 1 million-GBP 1.3 million, and then a new store, think probably GBP 1.5 million-GBP 2 million. That's sort of like the investment levels there.

David Wood
CEO at Wickes

We are going back and making sure that what we do not do over time is create another legacy problem with the condition of the overall estate. We go back now with these lighter touches on some of those early stores to get them up to spec. Very quickly on larger stores, there are a handful in the network. We do have plans for most in terms of a downsizing opportunity. That might be something that happens with one or two over the course of the next 12-18 months, actually. It is still there, but it is very at the edges of the focus of the property plan. Mark, I do not know if you want to talk to gross margin.

Mark George
CFO at Wickes

Just before that, just to add to the refresh economics, we would expect a similar level of return on capital.

Mark George
CFO at Wickes

We're spending less capital, as David said, so we'll have a smaller uplift in sales, but proportionately, it should deliver a similar kind of return. Gross margin, yes, as you noticed, 16 basis points up in 2024. We always assume that the right plan is to be flat for the coming year. We're not a business where we're trying to increase our gross margin. The way we want to operate is that we want to be the sharpest on price. You know that we monitor that every week across our competitor base. We try to be 2-3% cheaper on a basket basis and maintain that point and really drive that flywheel of being good on price, driving volume. That helps us with the relationship with the suppliers, and we get the benefit and gross margin that way rather than trying to squeeze on price.

Mark George
CFO at Wickes

If you're looking to plan for the year, I think flat outlook on margin is the right way to do it.

Mark George
CFO at Wickes

Great. Thanks so much.

Ben Hunt
Analyst at Panmure Liberum

Morning. Ben Hunt from Panmure Liberum. Just on TradePro, I think the general trend has been that AOV has sort of been a little bit lighter in the last year. People have been sort of perhaps been a little bit more frugal. Are you finding that perhaps as you're getting new customers through, some of them may be spending a little less than what they used to when you first started getting them on board? Really, the sort of evolution of the existing customers and the sort of seeing how their spending levels mature as they become more familiar with the concept?

David Wood
CEO at Wickes

Super question. Thank you, Ben. You're right.

David Wood
CEO at Wickes

At the high level, what we're seeing is the growth in TradePro is absolutely driven by the growth in customer count, which is great to see because any retailer just wants more customers coming over the door. Ben, they do still remain a little thrifty. When we look at the average order value, they've just been a bit more thoughtful about how much they spend. As I like to say, when they buy a stick of wooden battening, in the old days, if they cut it in half, half will go in the skip, half will go in the job, and now the other half goes in the back of the van. They've just been a bit more thoughtful about their material costs. They can be even sharper on price, I think, for the customer.

Mark George
CFO at Wickes

To the new customers that come onto the TradePro scheme, what's really encouraging is how quickly they adopt to what I would call the average levels of sort of loyalty and spend and frequency. That cycle is really about 8-12 weeks. We see within 8-12 weeks that a new customer becomes more like the existing customers. I think that's a really good and pretty pacey adoption curve, actually. The overall trends, growth in customers, a bit more thoughtful about the spend at this moment in time. We're comfortable because the most important thing is they're in the family. They're part of the TradePro scheme. We can now talk to them on a personalised sort of like opportunity through the app, giving them personal value through our machine learning tool.

Ben Hunt
Analyst at Panmure Liberum

Okay, great. Just a second question for Mark.

Ben Hunt
Analyst at Panmure Liberum

Just in terms of the outlook, maybe if you could give us, I do not know, any way you can elaborate on the inflation and the offsetting productivity, how you are seeing that sort of pan out. If you can give numbers, that would be great, but under

Mark George
CFO at Wickes

stand it is early days. Yeah, so inflation, you mean cost inflation, operating cost inflation rather than COGS, yeah. The main factor now in year-on-year inflation, as you would expect, is what is coming through in terms of wage increase. We are still feeling the effect of the 10% increase in national living wage that came through in April 2024. We have now got another 7% coming in April 2025, plus, of course, the increase in national insurance contributions. There are headwinds coming. We now have that, of course, planned for, and we have a good productivity program.

Mark George
CFO at Wickes

Of course, we had the good productivity program anyway. It's always on for us. It's a mindset that we look for those opportunities all of the time. We've got a good productivity plan coming in 2025, and we're looking to build on that. Do you think it's fair to say they will net out as they have done traditionally? We haven't given specific guidance on that, but that would be a good expectation for us to aim for. Clearly, there's a lot of inflation. We haven't got so much energy year-on-year inflation. We had that in 2024. That's sort of flattening off now, so that's helpful. Obviously, we've got more coming through in terms of wage inflation, so we're going to have to pedal hard on the productivity.

Ben Hunt
Analyst at Panmure Liberum

Hi. Sorry. A couple of questions on CapEx and on solar.

Ben Hunt
Analyst at Panmure Liberum

On CapEx, is the increase basically just because there are more new stores and a few more refits? Nothing else in there. There's a reference to the SaaS investment. Is that because it's treated as OpEx or it's under some other category like intangibles investments? I just wondered about that. Finally, on solar, I was myself getting some emails from you at the end of your last year on the product. How's that gone in absolute terms? How significant a number is it? Also, when you say better than average, what's a non-Wickes lead? I wasn't sure quite what the comparison was. Thanks.

David Wood
CEO at Wickes

Do you want to do the CapEx and SaaS and then? Yeah. Yeah, so on CapEx, the first thing, let's deal with the SaaS thing first.

Mark George
CFO at Wickes

The reason we've explained that is that investments that we make in new SaaS platforms are being put through the P&L now, so they're not in the CapEx number. We're still making significant investments there. We mention that because the CapEx number is smaller than it might have been a few years ago when the accounting treatment was a little bit different. The increase in CapEx that's going to come in 2025 is partly a little bit more on the property side, but also a little bit more on the tech side as well. We have a good program of initiatives to improve our digital platforms and back office systems. That's stepping up a little bit in 2025. That, in combination with a little bit more on new stores and refits, means that overall CapEx spend is going up. Good stuff.

David Wood
CEO at Wickes

On the solar, just talking to the conversion point, I mean, the thesis that really sat behind the acquisition of SolarFast outside of the clear market opportunity and very fast-growing addressable market was the fact that we believe our key point of difference is we are a known and trusted national brand that has a history of designing and installing complex projects in the home. Really, what we're seeing is if there's a lead that comes through the existing business versus a lead that comes through the Wickes business, we are converting at a much higher level. That has played out our thesis that there's a relationship and a trust with the homeowner that we can really capitalize on in a highly fragmented market where there are no brands that people really know and trust. We're seeing that in the conversion.

Mark George
CFO at Wickes

Early on, we see that as a really encouraging sign. Are you a warm lead, by the way, if we've been communicating to you? Because I'm happy to pick up after the Q&A. Excellent. Excellent. Good news. To give you some idea, about 25% of sales at the moment for SolarFast, our subsidiary, come from a Wickes channel, either generated in store from one of our colleagues talking to a customer or online or responding to an email from Wickes. SolarFast has its own marketing channels as well. Yeah.

Benjamin Yokyong-Zoega
Benjamin Yokyong-Zoega
Analyst at Deutsche Bank

Hey, morning. It's Benjamin Yokyong-Zoega from Deutsche Bank. I had a couple of questions. Firstly, on price deflation. Are you seeing the period of deflation you saw last year ease into the start of 2025? Would you expect pricing to pick up across the market?

Benjamin Yokyong-Zoega
Benjamin Yokyong-Zoega
Analyst at Deutsche Bank

If so, would you expect Wickes to be leading or lagging the market on pricing? Secondly, on trade, it has been a real pocket of strength last year. I am just wondering if you could share any insights on where that customer growth might be coming from, whether that is other retailers or builders' merchants or perhaps more of a structural shift away from DIY.

David Wood
CEO at Wickes

Good stuff. Thank you, Benjamin. Price deflation, as Mark sort of illustrated earlier on in his presentation, this has been a business that has been driven through volume across the course of 2024. We have had moderate deflation, probably around the sort of like 2% mark. As we start this year, that is definitely coming back to a more of a flat position at this moment in time.

Mark George
CFO at Wickes

It's hard to call looking forward, but I guess an assumption of maybe around zero to one and a half, two, maybe where things settle over time. We remain a price leader in terms of value. Very clearly, it's a core part of our proposition. We are an EDLP business. The vast majority, sort of like 80-85% plus of our business is our base business. It's a very strong price-led value model, and we will remain resolute and focused on delivering that for customers. TradePro. Oh, TradePro. Yeah. You can do that one. Go on. Yeah, I think when we talk to our customers and their new customers, they talk to us about having shopped previously in lots of different places. It's right across the board. It could be merchants. It could be some of the kiosk operators, some online-only operators.

Mark George
CFO at Wickes

It's probably worth saying that tradespeople normally have a repertoire of where they buy stuff from. It's not binary that they were shopping one place and then switch it all to another. Even the ones that do shop regularly with us will use others as well. It's a mix. What we're seeing is just shopping more with us. I think there is an overall trend, though, of smaller trades, individual traders, like the ones that we see mainly, moving away from the builders' merchants, more towards an operator like Wickes because they shop like a consumer. They're the decision maker. They're also the one that picks it up. They're very digital. They love shopping on the app, having click and collect within a few minutes and being able to pick it up, and we put it into their van for them.

Mark George
CFO at Wickes

All of that, we do brilliantly, and that's exactly what they want because they want to save time and save money. You may have seen some of the merchants talking about losing the trade from that small independent trader, and that's absolutely who we focus on.

Benjamin Yokyong-Zoega
Benjamin Yokyong-Zoega
Analyst at Deutsche Bank

Okay. Amazing. Thank you.

Matthew McEachran
Head of Consumer at Singer Capital Markets

Great. Thank you. Matthew McEachran from Singer Capital Markets. Sorry about that. All right, Matt. Quick question on design and installation. Just wondering if you could elaborate a little bit more on the kind of shape of this growth coming through in the order book. I mean, you've talked about positive growth, but are we talking marginally positive or low, mid-single-digit growth? I wondered how many decimal points do you want? I love the way you're constructing the range there. It's great. It's really good.

David Wood
CEO at Wickes

I'm going to let Mark answer this one for fear of tripping up, team.

Matthew McEachran
Head of Consumer at Singer Capital Markets

Maybe just give us a flavor. Are you seeing a lot more inquiries, or is it really the funnel where you're getting the conversion rates up? Is awareness already kind of built that you've got the improved value lifestyle range out there?

David Wood
CEO at Wickes

You do the first, I'll do the second.

Mark George
CFO at Wickes

Yeah. Okay. In terms of that, we're not going to give any numbers at this stage. What is really great is that it's the second consecutive quarter of ordered sales growth when we had between 18-24 months of negative. That's great. Also, wanted to stress that we talked about the revenue segment and changing. Regardless of whether it is old money or new money, that part of the business is growing in both Q4 and Q1.

Mark George
CFO at Wickes

We will give a more thorough update with our 16-week trading update, which will come in May. I think just a continuation of a good positive trend, we'll say at this stage.

David Wood
CEO at Wickes

I think the nature of the growth, very similar to TradePro, actually, it's customer growth. It's project growth. We are serving more customers and more projects. The AOV is reasonably flat. It's customer growth and project count growth that is driving the performance of that business.

Matthew McEachran
Head of Consumer at Singer Capital Markets

You mentioned the process in terms of getting the installation through as having been made more efficient. I'm reading into that it's probably quicker than it has been in the past, or is that just dependent on the customer demands? We are able to align.

David Wood
CEO at Wickes

Through our new field service management tool, which is an app that is connected between the stores, the DCs, and the installers, almost before a customer who has placed an order with us exits the store, we are able to align the installer because the tech just deals with it. It can see into the drivers of all the installers, and it can allocate the job in a way that we previously did not have that kind of technical platform. The speed at which the customer can be introduced to their installer has improved dramatically because it can be down to hours as opposed to days or weeks. The overall capability of the business, though, is we can still, between sort of like 8 and 12 weeks, go from full design to full installation for a major project in the home.

Matthew McEachran
Head of Consumer at Singer Capital Markets

Yeah. Yeah. Great. Thank you.

Sam Cullen
Sam Cullen
Analyst at Peel Hunt

Thanks. Morning. Sam Cullen from Peel Hunt. I've got a couple as well, please. Just on market share, you've given the chart around your growth over the last five years or so. What do you think your share is at the moment in that retail channel out of interest? Secondly, if we do see volumes pick up in the next 12-18 months, is there any sort of restocking you guys need to do through the channel? Are you pretty well stocked as you are?

Mark George
CFO at Wickes

Yeah. Market share, a couple of ways of looking at it. Really big picture, the home improvement market in the U.K., we think is about GBP 27 billion. We do GBP 1.54 billion. You can see sort of around 6% market share. That would include also the design and installation part of home improvement.

Mark George
CFO at Wickes

When we define market share in the charts, that is the retail side of the business where GfK creates using sales data from retailers as inputs. We're not allowed to give the exact number of that. It's a little bit higher than the 6% for the overall market to give you some idea of how we sort of within that particular measure. It is a robust, reliable measure using point-of-sale data from the retailers themselves.

David Wood
CEO at Wickes

Sorry, Sam. Can you remind me of your second half of that question?

Sam Cullen
Sam Cullen
Analyst at Peel Hunt

Any restocking needed if volumes do start to?

David Wood
CEO at Wickes

Yeah, restocking. I mean, the good thing is Mark spoke to the AI-based sort of like forecasting and stock replenishment tool that we now have in the business, which is highly responsive. We're moving the stock through the business really quite swiftly.

David Wood
CEO at Wickes

As you know, one of the parts of sort of like the economic model of our business is it's a highly curated range where our top 150 lines alone will make up 35% plus of our sales every week. There is a really efficient sort of like flywheel of how stock moves through the business. As I like to say, it comes to the back door, goes to the shop floor, and out the front door very quickly in an unrivaled way versus the rest of the marketplace. I don't anticipate needing to lift the stock levels.

Mark George
CFO at Wickes

If sales lift, stock turn would lift rather than stock. We're not anticipating a broadening of the range or anything like that.

Mark George
CFO at Wickes

Okay. There are currently no questions on the conference call, but we do have a question online from Adam Tomlinson from Berenberg.

Mark George
CFO at Wickes

On design and installation, can you please talk about the drivers of ordered sales growth? How much is help from prior comparatives? How much is any pickup in underlying consumer activity, and what is being driven by self-help? On latter, what self-help improvements have you made? Thanks.

David Wood
CEO at Wickes

Do you want me to do that? Yeah. I think, Adam, hi, good morning. Look, the primary driver here, as I said, is it's an increase in the volume of projects. We have more customers coming to our business for the service that is our design and installation business. That is because we have organized ourselves now. The developments that we've done, it's hard to pull out any individual development that's driving this. We've completely reset the value chain. We've made it really easy through tech to customers frictionlessly access a DC. Previously, that wasn't the case.

David Wood
CEO at Wickes

They can get into the journey quicker. We continue to innovate in the range, innovate in value, innovate in the promotional activity, innovate in the advertising in terms of driving that awareness, which leads us to have greater leads, greater customer count, greater volume, and actually that improving conversion. The back end of the whole of that journey, of course, we hand off through FSM, which is a new piece of tech, which is making it much easier to align the installer, and we hand them into the Customer Experience Centre, which is a unique proposition within the business. I think it's a sharpening and a repropositioning of a number of things that is just making the overall experience for the customer really sticky in terms of appeal.

David Wood
CEO at Wickes

Great. There are no further questions on the webcast. I'll hand back to the room for closing remarks.

David Wood
CEO at Wickes

Super. To conclude, 2024 has been another great year for the business. Retail, further growth in terms of retail sales, further market share outperformance. Our design and installation business now back into a more consistent path of growth, which we're delighted to see. That means we have delivered at the top end in terms of profits. We've delivered great returns to shareholders this year at GBP 41 million, and we've announced a new buyback. This is a confident business with a clear strategy, clear self-help growth levers, with a balance sheet that we can invest in to continue to drive that growth. We remain positive for the outlook for the year to go. Thank you very much for joining us this morning.

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