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And in theory, £25m share buyback done at this price ( unlikely) should add 7% to EPS. I think.
Liberum will pick up on that, if/when they review. I expect them to do so.
One more thing, which may alter perspective in overall consideration.
IT separation is now complete. Last financial year that spend was £24.4m.
Mick. On your comment
That’s obviously going to result in broker forecasts dropping, or they might have already factored this in? I can’t find any broker research unfortunately, so am in the dark on this point.
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I don’t know, did you maybe miss this bit.
● Our reported adjusted PBT going forward will be after the impact of IAS38 accounting. In FY2023 only, we will also reference adjusted PBT before the impact of IAS38 (ie the profit that would have been delivered if all of the IT investment had been capitalised), in order to align with analysts' original forecasts for the year.
My understanding is that LFL is a reflection of revenue change using as far as is possible similar circumstances as last year. eg excludes new stores.
The inflation figure, varying across categories, relates to input cost to Wickes on goods/services.
As always, very willing to be corrected on anything.
Thanks Mick. I thought like for like was a volume not a value measure. So inflation factored out.
CONTINUED.........
Paul’s opinion - I think this is really encouraging, and the big yield + meaningful buybacks, reinforces that this is a decent business, well financed, and whose shares seem cheap.
It’s one of my favourite value shares, and that remains the case, so a thumbs up.
Let’s hope the diversity & inclusion manager keeps his trap shut in future! Most people don’t want companies to broadcast their virtue-signalling. Just treat everyone fairly, and then there aren’t any problems either way. And never, ever, insult your customers! (even if it is taken out of context). So I hope WIX has learned from its recent communications debacle.
Good fundamentals, a cheap valuation, generous divis/buybacks, and a chart that's looking nice too - lots to like here!
https://app.stockopedia.com/content/small-cap-value-report-tue-25-july-2023-quiz-tstl-rch-wix-stem-pier-fa-yu-ecel-tymn-972494?order=createdAt&sort=desc&mode=threaded
SUBSCRIPTION ONLY
Q2 LfL sales improved to +3.0% (was -1.8% in Q1), still well below inflation though.
H1 LfL sales were +0.7%
I can’t see any benefit from the company splitting out “core” and “DIFM” (do it for me) sales figures.
Inflation - it’s not entirely clear if this is talking about input cost inflation, or selling price inflation? Probably selling prices I would guess -
Inflation continues to slow, in line with our expectations, falling from 9% in the first quarter to 4% in the second. Wickes continues to retain its strong price position relative to the sector.
Cost inflation - sounds reassuring -
Costs remain well controlled, with savings flowing through as expected in distribution, logistics and store operations.
It doesn’t say anything about gross margin, which is surprising. I would imagine that importing a large quantity of bulky items would have seen big benefits on margin through reduced sea container freight.
IT spending - big upgrades are planned, and it says this will mostly be expensed through the P&L, rather than capitalised -
IT project investment is anticipated to be c.£17m in FY2023 and grow to c.£25m per year from FY2025…
The impact of this switch from capex to opex for some investment costs will have no effect on future cash flow. For four years PBT will be reduced until the higher IT opex is fully offset by lower IT amortisation costs. We estimate the impact on PBT to be £8-10m in FY2023, £6-11m in FY2024, £4-7m in FY2025 and £1-3m in FY2026;
That’s obviously going to result in broker forecasts dropping, or they might have already factored this in? I can’t find any broker research unfortunately, so am in the dark on this point.
Capital allocation - various points made, including saying that it won’t need to use its RCF, expects to be in net cash throughout the year. More scope for paying divis, by adopting a broader range of dividend cover from 1.5x to 2.5x adj EPS (previously 2.5x cover).
Dividends - maintaining 10.9p total divis for FY 12/2023, giving a sparkling 8.1% yield.
Intention to hold the payout at 10.9p until cover returns to normal. There’s obviously some risk there, that a downturn in trading could scupper future divis, but they say they’re confident.
Share buyback of £25m announced today - that’s a lot, coming on top of a generous yield, and for a £350m market cap that implies buying back about 7% of the existing shares.
Paul’s opinion - I think this is really encouraging, and the big yield + meaningful buybacks, reinforces that this is a decent business, well financed, and whose shares seem cheap.
It’s one of my favourite value shares, and that remains the case, so a thumbs up.
Let’s hope the diversity & inclusion manager keeps his trap shut in future! Most people don’t want companies to broadcast their virtue-signalling. Just treat everyone fairly, and then there aren’t any problems either way. And never, ever, insult your customers
There’s several other bits of reporting, nothing downbeat, and getting repetitive. Would welcome any analyst comment.
CHEERS CULPEPPER
🍻
Investors Chronicle short summary
Wickes' shares rise after new dividend policy
Shares in Wickes (WIX) climbed 6 per cent this morning after the home improvement retailer launched a £25mn buyback programme and overhauled its dividend policy.
Dividends will be based on “a cover range of 1.5 to 2.5 times adjusted EPS (earnings per share)”, compared with its historic post-tax payout ratio of 40 per cent.
In the same update, the company also reported a 3 per cent bump in like-for-like sales and announced a new focus on cash as a measure of balance sheet strength over lease-adjusted debt. Its full-year dividend will be maintained at 10.9p a share. ML
I wouldn’t say that. Share buybacks at what they take to be a low price, and investing for the future on selective store openings, and digital sales, whilst paying a divi.
I couldn’t ask any more from a progressive company.
I really do struggle to see the point of share buy backs although every company seems obsessed with them, appears short sighted to me, lack of ideas.
‘Comfortable’ with analysts estimates, on PBT, too. Margin holding up whilst maintaining competitive pricing.
With inflation improving, it’s possible they’ve bottomed out this part of the economic cycle.
Agree, wonderfully re assuring and what a great dividend yielding share we all own. Looking forward to more SP uplifts and rises in the SP plus continuation of nice dividends.
Looks good to me.
Divi maintained and £25 buy back about 7% of company shares
At theses prices a forward looking return of over 15% per annum as we move into a period where interest rates and inflation move downwards. Happy with update and my holding.
Feels like 10% plus today
Separation of systems from Travis Perkins I think was due to complete this spring, and being a one-off total, will not repeat. That will be a considerable saving.
I'm about 15% down on my buy in price.
They look steady albeit unspectacular no debt and good divies.
I think the extra £10m on utility bills stuck out in the last update and I'm hoping they reveal costs were a fair bit less. Fingers crossed
I expect nothing better than what may be seen as a relatively indifferent update, as the economy prevails.
In my opinion the company is competitively sound, so it may be down to at least a good, hopefully growing, share of the available market. I expect the financial update may be limited. If they are able to say performance is at least in line with their own expectations, it will satisfy me.
It’s fair to say I have a little more interest in them revisiting capital allocation, on prospects for divi and so on going forward.
What's your feeling for Tuesday Culpepper ?
Unfortunately appears to be running out of energy. Bloody CEO, what an utter plank with the IQ of a cheese sandwich!
25th. July