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KGF getting a real beating for those results, but mainly due to their overseas operations so no real read across to WIX. Just sector sentiment taking a hit today.
Kingfisher 6 month results today. Whilst trading strongly in UK, downgrades profit expectations.
As reported by Wickes.
“On a Pre-IAS38 Adjusted PBT basis, the Company is comfortable with the market consensus for FY2023, being a range of £54.5-57.0m.”
Exercises nil cost options. Sells sufficient within buyback to cover costs.
https://www.lse.co.uk/rns/WIX/directorpdmr-shareholding-s89qjtftrjq85uj.html
In fact, I think it smacks of being thrown together from one RNS. No mention of new capital allocation policy, share buy-backs and more.
Found that a bit strange write-up. Sounds rather negative, then says BUY.
Should be IFRS 16 2019.
Wickes pre-tax profit halves due to administrative costs
The home improvement retailer still looks good in the long run, despite its issues
September 13, 2023
By Mitchell Labiak
* Paltry revenue growth
* Larger cash holding
On its own terms, Wickes' (WIX) £7.4mn IT cost was a small price to pay for its divorce from Travis Perkins. However, when combined with a hike in other backroom costs, including IT investment, bonus payments and "modest inflation in support centre costs", it added up to £20.8mn. It was enough to slash its pre-tax profit for the six months to 30 June by almost 40 per cent.
The fact dividend payments remained at 3.6p per share is perhaps a sign Wickes is confident in its underlying performance. After all, revenue did grow – albeit marginally. The drop in DIY sales was offset by growth in what the company calls “DIFM” (do-it-for-me), whereby customers who buy items such as kitchens and bathrooms get them built as a service.
Wickes believes things will improve, saying it is “comfortable with FY consensus expectations [of] adjusted pre-tax profit of £45mn to £48mn after the impact of SaaS IT investment costs”. According to the consensus of analyst forecasts from FactSet, pre-tax profit will grow to £66mn by the end of 2025, while earnings per share will reach 21.1p. It would give the stock a price to 2025 forecast earnings ratio of 6.7 times, which is good value if those forecasts prove correct.
The big bear point is that its net debt is 293 per cent of its equity. The bulk of its liabilities are its leases for shops, which enables it to trade, but Wickes is aware of its need for a healthier balance sheet and is filling up its coffers with cash accordingly. It's a prudent move and a trend we hope will continue. Buy.
Last IC View: Buy, 143p, 23 Mar 2023
I don’t consider it’s much of a bear point, as pre IFSR 16 2919 accounting measures Wickes would have been viewed as having no debt at all, but now has to include total monies that will fall due to be paid throughout the remainder of the lifetime of the lease. Fact is, they pay as they go, as payments fall due, and will continue to do so.
Yes Culpepper. Wix have a lot of non cash charges in respect of leases which means cash flow is materially higher than pre tax profit.
I think this an excellent hold with 8% yield guaranteed with as you say propect of SP gain or potentially special dividends. Strong hold for me.
Just in passing, I read opinion that Liberum anticipates that with cash in hand at an annual low point at year end, and £50m being the company new primary cash metric, dividend satisfied etc., excess cash will be utilised for ongoing buyback, aimed at increasing eps.
Extremely cheap.
https://citywire.com/funds-insider/news/expert-view-wickes-4imprint-keywords-studios-darktrace-and-ashtead-technology/a2425603
Https://retailtimes.co.uk/wickes-recovery-built-on-strong-difm-category-says-globaldata/
I expect they’ve been hedging exposure to foreign suppliers.
If you find out, maybe you could let us know out of interest.
Why are they dabbling in FX derivatives?
Little more comment.
https://uk.finance.yahoo.com/news/wickes-diy-sales-slide-refurbishments-150011562.html
That's what I'm hoping Makros.
I can't see much downside risk and the dividend is not far shy of 8%. Definitely a hold for me.
I'm here for a buy out or £2 plus
With it's strong cash position , decent trading and low multiple compared to peers surely it must be on someone's radar at these levels?? what do others think?
Thanks Culpepper. I'm not getting the IT costs.
The detailed adjusting item note describes these as mainly one off data separation closing old system developing new one.
Logic would suggest a dip in profits to accomidate one off expenditure and a rise thereafter.
The summery note then confirms the separation is complete but the cost saving will be subsumed by costs of the new IT system.
Post separation we have been left with a much more expensive IT system let's hope it feeds through to the bottom line and some business benefits.
Very short summary.
https://www.proactiveinvestors.co.uk/companies/news/1026175/wickes-holds-dividend-as-half-year-profit-falls-1026175.html
Https://www.lse.co.uk/rns/WIX/interim-results-2023-7yoje5g263zi0bc.html
I consider that a healthy update under current economic circumstances, and importantly we are told that market share continues to increase with plenty of headroom.
IT separation from Travis Perkins is complete. Wickes is now in an investment period on it’s own IT, alongside store estate.
Pretty solid.
I like cash position £190m [ June 22 £166m]. This irons out seasonality and shows the company is cash generative despite attractive dividend. Also 65% of market value backed by cash.
I don't like IT separation costs. These have increased again and there seems no end in sight.
Happy to hold and i may be way off beam but at this price it seems wide open to a bid. Mega strong balance sheet, market value covered by assets in particularly cash, price earnings despite IT separation costs of 7 or 8. Strong cash generation. Happy to hold.
With share buy back underway will we see further correction in tomorrows RNS ?
“Plan to maintain FY2023 dividend at 10.9p - based on a strong balance sheet and confidence in the business performance we plan to maintain the FY2023 dividend at 10.9p per share. Together with the impact of IAS38 on our adjusted PBT, dividend cover will initially be outside our new target range. The Board intends to maintain the dividend at 10.9p until cover moves back into the target range as profits recover”
It seems we can therefore expect, following last year, an interim dividend of 3.6p per share payable to investors on the register at close of business on 30th September, payable in November, with 7.3p to come as a final dividend.
Will supplement trading update.
https://www.lse.co.uk/rns/WIX/trading-statement-bq4qatoizrpfnbn.html
12th. September 2023
More advertising.
https://www.insightdiy.co.uk/news/wickes-launches-300-new-bathroom-products/12750.htm
https://www.insightdiy.co.uk/news/wickes-launches-new-kitchen-ranges/12753.htm
It’s as advertised. £12.5m twixt now and Feb 2024.
“The sole purpose of the Initial Programme is to reduce the Company's share capitaL”