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Travis Perkins Updates On Proposed Wickes Demerger

Wickes Cardiff sign

In December 2018, Travis Perkins announced a long-term strategy based around focusing on its advantaged trade businesses and simplifying the Group to enable a more streamlined cost structure and faster decision making. In line with these strategic aims, and following a significant improvement in the financial performance of Wickes Group plc ("Wickes" or the "Company"), the Group announced the intention to demerge Wickes in July 2019.

Having completed the vast majority of the work on the Wickes demerger, on 20 March 2020 the Group announced that it had placed the process on hold in order to focus on managing through the COVID-19 pandemic and to maximise liquidity across the Group. With the Group, and Wickes in particular, having demonstrated the resilience of their operating models in unprecedented market conditions through 2020, the Board announced the decision to recommence the Wickes demerger process on 2 March 2021. 

The demerger will enable the management teams of Travis Perkins and Wickes to pursue their own independent strategies, each focusing on executing a distinct business plan to deliver the best service to their primary customer base and allocating capital in the optimum way to deliver sustainable returns into the future. 

Today marks the next milestone in the process with Travis Perkins announcing that the Circular in relation to the proposed demerger (the "Circular") and the Prospectus in relation to the proposed admission of the Wickes shares (the "Prospectus") have each been submitted to the Financial Conduct Authority (the "FCA") for approval. It is intended that the Wickes shares will be admitted to the Premium listing segment of the Official List of the FCA and admitted to trading on the Main Market of the London Stock Exchange.  

A further announcement will be made once the Circular and the Prospectus have been approved for publication by the FCA, which is expected later today. 

Nick Roberts, Chief Executive Officer of Travis Perkins Group, commented: "I am very pleased that we have reached a significant milestone in the process to demerge Wickes from the Travis Perkins Group. It is testament to the strength of both the Group and Wickes operating models that we are back on track to complete the demerger despite the pandemic. 

The demerger is an important step towards simplifying the Group and enabling Travis Perkins to focus on its trade customers. The separation will allow both businesses to allocate capital to drive growth and further enhance their market leading positions." 

David Wood, Chief Executive Officer of Wickes, commented: "This is a key milestone on our journey to listing on the London Stock Exchange as a standalone business in what will be a transformational moment for Wickes. 

I am very proud of our performance last year amid the challenges faced by our colleagues, our supply partners and, of course, our customers. The results we delivered during this period are evidence of the strength of our unique proposition, digital capability and efficient operating model, which has enabled us to respond rapidly to the changing demands of our customers. 

The past year has prompted many of us to think differently about our how we use our homes, and as a result, we are seeing strong demand from customers who are looking to make changes to their living spaces. We are able to provide customers with everything they need to achieve their home improvement plans and we are well placed to capitalise on the exciting growth opportunities we see in our markets while creating long-term value for all our stakeholders. The current year has started well and we are confident in continuing to deliver sales growth ahead of the market for the full year." 

Wickes Business Highlights 

  • Wickes is a digitally-led, service-enabled home improvement retailer, delivering choice, convenience, value and best-in-class service to customers across the United Kingdom making it well placed to outperform its growing markets. In response to gradual structural shifts in its markets over recent years, Wickes has rebalanced its business to focus on three key customer journeys - Local Trade, DIY (together "Core") and Do-it-for-me ("DIFM")

  • Wickes operates in the growing home improvement market, which is underpinned by robust fundamentals. This market has demonstrated underlying growth of around 2.5% CAGR in the period 2013 to 2019 and this growth is forecast to continue for the next five years. For the period 2013 to 2020 underlying growth was 1.9% CAGR

  • Wickes operates from its network of 233 right-sized stores, which support nationwide fulfilment from convenient locations throughout the United Kingdom, and through its digital channels including its website and TradePro mobile app for trade members. These digital channels allow customers to research and order an extended range of Wickes products and services, arrange virtual and in-person design consultations, and organise convenient home delivery or "click-and-collect" slots

  • Wickes' established, efficient and integrated service model enabled the business to deliver a strong performance in 2020 despite disruption caused by the pandemic. Digital customers almost doubled and click-and- collect orders were up 450% for the year, whilst home delivered sales increased by 120% for the year

  • Three independent non-executive Directors have been added to the Wickes Board, in addition to Christopher Rogers, Chairman. The Directors are Mark Clare; Sonita Alleyne, OBE, FRSA; and Michael Iddon. Details of their relevant experience are in the notes to editors 

Wickes Financial Highlights 

  • Wickes has demonstrated strong growth ahead of the market. From 2013 to 2019, the Group's revenue grew at a CAGR of 4.9%, increasing by over £300m to £1,292m in 2019

  • In 2020, Wickes recorded revenue of £1,347m, with 5.0% like-for-like revenue growth, and adjusted operating profit of £82m

  • The 2020 performance was driven by the strong performance of Core, with growth of 18.8% on a like-for-like basis, leveraging Wickes' well-developed digital and flexible fulfilment capability and increasing market share across the year. However, DIFM was significantly impacted in 2020 by restrictions on showroom openings and resulted in like-for-like revenue being down by 27.8% 

Current Trading and Outlook 

  • Performance trends in the second half of 2020 have continued into the current financial year. Strong Core sales seen in the second half of 2020 continue whilst DIFM orders were c. 50% lower year-on-year through the key winter sale period, as showrooms remain closed

  • Whilst sales remain robust, the benefit has been offset by associated costs with high participation of customer delivery and assuring a COVID-19 safe operating environment for colleagues and customers

  • Although the economic outlook and trading environment remains uncertain, Wickes expects to deliver sales growth ahead of its markets for the full year. Core growth is expected to moderate against tougher comparatives through the year and management is confident in a recovery of DIFM sales with pent up demand, evidenced through a high level of enquiries, likely to come through as lockdown restrictions ease 

Details on the Prospectus and Circular 

When approved by the FCA, the Prospectus and Circular will be made available on Travis Perkins' website at www.travisperkinsplc.co.uk/investors and the Prospectus will also be made available on Wickes' website at www.wickesplc.co.uk. 

Details of the Capital Markets Event 

The Wickes management team will host a virtual Capital Markets Update at 10.30am on Friday 26 March 2021 for investors and analysts. The presentation will provide an overview of Wickes' resilient performance throughout 2020, alongside a summary of its distinctive customer proposition, financial framework and vision for the delivery of continued growth.  

The presentation will be followed by live Q&A with the Wickes management team. To register, please sign up here.

Source : Travis Perkins PLC

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24 March 2021

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Thank you for the excellent presentation that you gave at Woodbury Park on Thursday morning. It was very interesting and thought-provoking for our Retail members. The feedback has been excellent.

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Martin Elliott. Chief Executive - Home Hardware.
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