Shares in home improvement group Wickes (WIX) rose 3.2% to 240p, following the announcement of interim results for the 26 weeks to 26 June, that were ahead of market expectations.

Management have upgraded their forecasts for the full year and are now expecting adjusted pre-tax profit to be at the upper end of the £67 million-to-£75 million range. These results may act as a catalyst for investors to revisit Wickes as an exciting undervalued longer-term growth story.

Adjusted profit before tax increased to £46.5 million, ahead of guidance of £45 million. Reported profit before tax increased to £35.7m. The interim dividend of 2.1 pence was in line with guidance.

Today’s consensus beating results mark a watershed moment for Wickes that was spun out of Travis Perkins in April. The lackadaisical share price performance in recent months is indicative of the difficulties the group has encountered in gaining support from the investment community.

However the robust nature of today’s results coupled with the increase in guidance for the full year may prompt institutional investors to re-visit Wickes as a long-term investment opportunity.

SUSTAINABLE GROWTH

Wickes has undoubtedly been a beneficiary of lockdown, as people have increasingly embraced home improvement. Nonetheless fears that growth will dissipate post lockdown may be flawed. Housing transactions and mortgage approvals remain robust.

Moreover working from home is driving greater interest in home improvement projects. Households have in excess of £20 billion in excess savings, which will facilitate the financing of these home improvement projects.

DIGITAL PENETRATION

Approximately 66% of Wickes sales are from digital channels while Wickes digital customer base has grown to well over 5 million. This figures is set to grow further with the launch of the DIY app and E-receipts. Data derived from these initiatives will enable the group to deliver and drive more personalization.

Critically Wickes will benefit from having a more engaged audience, increased loyalty and higher retention rates.

EXPERT VIEW

Wayne Brown, research analyst at Liberum said: ‘we continue to see Wickes as one of the best ways to play the UK repair maintenance and improvement trade…the shares remain far too cheap, for the high quality growth, upgrade momentum and strong cash generation on offer.’

READ MORE ABOUT WICKES HERE

 

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Issue Date: 16 Sep 2021