Wickes Group plc (WIX) Earnings Call Transcript & Summary

Good morning, and thank you for taking the time to join us today. And I'd also like to welcome everyone who is watching via the webcast. I'm here with our CFO, Mark George, and we are delighted to share with you our results for the 6 months to the end of June. We'll spend the next 20 minutes or so taking you through the performance of the business and the broader market trends as well as highlighting the great progress we are making on executing our strategic plans. I am pleased to report we delivered a resilient performance in the first half and made record market share gains in our retail business which comprises of Local Trade and DIY. I'd like to take this opportunity to thank all of my 8,000 colleagues for their incredible work in delivering these results and helping the nation feel house proud. In a challenging market, our outperformance is a clear demonstration that our uniquely balanced business model and strategic growth levers continue to deliver and position us well looking forward. We continue to see great success with our TradePro scheme with sales up 14%. And this week, we're celebrating hitting our target of 1 million members. In our design and installation business, we are encouraged by the success of our Lifestyle Kitchens performance with sales up 19% in the half. And of course, we've added a new arm to our design installation business, the recent acquisition of Solar Fast, gives us an opportunity to build market leadership in the rapidly growing home energy solutions market. And in the half, we've begun our initial roll-out of Wickes Solar in 50 trial stores and online. Our new store, refit program is progressing well, and we're delivering returns, and we've opened two new stores and undertaken three refits in the first half with more to come before the end of the year. We've returned GBP 28.9 million to shareholders and today confirm that we maintained our interim dividend at 3.6p. And I'm absolutely delighted that the great work we're doing across our Built to Last, responsible business strategy has resulted in us gaining entry into the FTSE4Good index. In Q3 so far, we've been encouraged by the improved performance in both Retail and Design & Installation. We've taken planned actions to mitigate the impact of inflation, which along with our improved current trading means that our overall outlook for adjusted PBT remains unchanged. I'll now hand over to Mark to take you through the numbers in a little more detail.

Thank you, David, and good morning, everyone. As David mentioned, we've made a good start to 2024, and we've got some of the headlines here on this slide. Revenue was GBP 800 million in the first half, Retail was in positive like-for-like, and that's been positive now in like-for-like terms for about a year. So that's really encouraging. Design & Installation, delivered sales have been in decline, reflecting a tough market conditions for big-ticket items. Gross margin was a little higher at 24 basis points higher year-on-year with really careful management of pricing and promotions. And this stable gross margin along with tight cost management has helped us support our profit level. We've delivered adjusted profit before tax of GBP 23.4 million in the half. We continue to operate with a strong balance sheet. We ended the half with GBP 152 million of cash. And this enables us to deliver good returns to shareholders. So in line with our capital allocation policy, we are maintaining the interim dividend at 3.6p and we're continuing with the share buyback, which is now nearing completion. So just turning to the P&L. Trading conditions in 2024 so far have been rather similar to 2023. There's been no inflation in our top line. In fact, actually, there's been deflation, which we'll come on to in a moment, but there's still been a lot of inflation in our cost base. So in light of this, the profitability in the first half of 2024 has been resilient. Revenue on a like-for-like basis in total was down 3.9%. The slightly higher gross margin, meant that margin in pound note terms were down only 2.7%. Operating costs have been tightly managed. And despite the inflation in energy and in wages, overall, we've spent the same amount on operating costs this half as we did the same half in 2023. So the fall in profit before tax year-on-year was driven purely from the flow-through of lower sales. And that, in turn, has come purely from the reduction in sales of Design & Installation. So let's break that down a little bit more into detail. So you can see here, Retail and Design & Installation sales in the half. First of all, Retail, a good sustained period of positive volume growth now. So record market share, demonstrating that our model is working. The positive like-for-like that we're seeing is driven by volume. You can see in the table there, the first half, we had deflation of around 3% and volume growth of just more than that. And hence, the 0.6% growth in like-for-like. Also worth noting the Easter effect. So it reduced our Q2 numbers by about 1.4%. If you took that phasing out, we would have been in growth for both Q1 and Q2. And the real driver behind our retail success in the first half has been TradePro. You can see there an 18% growth in the number of active TradePro members shopping with us, 14% growth in TradePro sales. So really very strong performance again from TradePro. Now the Design & Installation side of our business, it has been tougher. The market environment for bigger ticket projects has been soft, as you all know. So just to work through the numbers a little bit, our delivered sales in addition to audit sales being slightly lower in the first half year-on-year, high single-digit decline in audit sales. We were also lapping a period of strong delivered sales in H1 last year, where we were working through the elevated order book that we had in that post-COVID period. So the two things coming together has resulted in the big decline there that you can see in delivered sales. But as David mentioned, on the value end of our range, we're doing very well. So Wickes Lifestyle Kitchens, up 19%. And as you know, some of the sales go into Design & Installation, if they've had a design component from one of our design consultants, and the remainder of the sales will go into Retail. So this profit bridge shows the sales shape coming through really clearly. Now in this bridge, we take distribution costs out of gross margin, which for statutory reasons are in gross margin. But here, we show them as a cost. So the margin that we see here is the pure trading margin. And you can see that we've increased the trading margin in Retail. We've had a slight increase in sales and a slight improvement in gross margin rate and hence, the improvement in Retail margin. The decline in Design & Installation sales inevitably dropped through to a decline in trading margin. And you can see that here. In addition, we've got higher consumer credit costs year-on-year with the introduction of more interest-free credit options for our customers. But on costs, we're delivering productivity plans in line with our expectations really well. And they're offsetting the cost inflation. These are initiatives in distribution in store productivity and lower store costs and shrinkage through the stores. So some really great initiatives from across the business. We continue to invest in technology and customer service, and this will be good for customers, but also good for operating costs in the future. And then the other bucket here is a combination of lower property program costs and colleague bonus. So the adjusted profit number of GBP 23.4 million is a good result in light of the inflation and significant pressure on the Design & Installation business that we've been seeing. Turning now to the balance sheet. So we continue to operate with a strong balance sheet, and we ended the half with GBP 152 million of cash. So the starting point for that, of course, is the strong profit number, which is always the basis for positive cash flow. We then have the usual add-back for depreciation. And then the significant inflow for working capital of GBP 65 million. Now you'll recall that we have a seasonal shape, which always means we have positive inflows in the first half, and they unwind in the second half, and that will happen again in the second half of '24. We've got CapEx of GBP 12 million in the first half, and that's broadly in line with our outlook for GBP 30 million for the year as a whole. And you can see the Solar Fast acquisition of GBP 5.1 million in there as well. But the strong balance sheet that I described has enabled us to deliver good returns to shareholders. And you can see a combination there of the dividend. The final year dividend from last year, which was paid in H1, plus the buyback, we've delivered GBP 29 million of cash back to shareholders. So I'll end with some comments on outlook and guidance. So far in Q3, trading has been on an improved trend, and David will say a little bit more about that in a moment. We're continuing to outperform the market and the most recent market share data shows a very strong performance by Wickes. So current trading plus the productivity plans that we have underpinned our outlook on profit for the year, and we remain comfortable with market consensus for PBT for FY '24. Now we've also provided some technical guidance there for you. I'm not going to take you through it because it's completely unchanged from the start of the year. So to summarize, to wrap up, the business is continuing to perform well. Even in a tough environment, we're performing well, resilient profit and really importantly, growing market share. The retail side of the business continues to perform well. It's been more challenging in Design & Installation, but that is now stabilizing as well. Good cost management has minimized the drop in profit year-on-year, and it will stand us in very good stead as we grow profit next, as we -- sorry, it will stand us in good stead to grow profit as the wider economic environment improves. With that, I'll hand back to David.

Thank you, Mark. Next slide, please. This slide will be familiar to you. It outlines the strong portfolio of growth levers that we have to win in the market and to achieve our very simple purpose, which is to help the nation feel house proud. I'll take a few minutes to share how investment in our growth levers is delivering results. But before I do that, I thought it would be helpful to look at some key trends in the market as we put our strategy into action. Overall, we can see market trends heading in the right direction, albeit the external environment does remain uncertain. It is against this that we believe Wickes and its differentiated business model is well placed to continue to gain market share. As you'll be aware, we conduct regular customer research surveys to ensure we always have our finger on the pulse of what home improvers want. Firstly, from the perspective of local trade, they are telling us that their pipelines of work remain healthy around 50% of them have worked lined up for over 3 months and 25% have work lined up for over a year. Understandably, though, they continue to be cautious about costs, with 28% telling us they are being mindful about the materials they buy, and they're shopping with us for the great value that we offer. Turning to those customers who are in the market for a new kitchen or bathroom. We're seeing that planned spend on these big ticket items has stabilized in recent months, although it remains below historical norms. There is definitely stronger demand for more affordable projects, which, of course, our Wickes Lifestyle Kitchens range plays into. That means, we are well placed to benefit from this trend. And with consumers looking for ways to make the cost of running a home more affordable, 15% of home improvers have considered installing solar panels over the last year. DIYs continued to focus on doing smaller projects such as painting, decorating, bit of garden maintenance, it just costs a little bit less. What is notable is that those product categories linked to larger projects are more challenged, the impact of which is being seen across the market with the recent administration of Carpetright and CTD Tiles. However, we continue to outperform and take share as the market consolidates. We can clearly see how these market trends translate into our business performance and why our balanced model that spans all three customer propositions is so well placed to benefit from and mitigate changing consumer trends. So looking at Retail first. We continue to outperform the market. As you can see from this chart on the top right of the slide, we've seen record share gains in the first half, building on 5 years of consecutive growth. These gains have been particularly strong in the key categories of decor, garden, tiles and flooring. Trade continues to be a crucial growth driver for our Retail business. As I said before, these are our most strategically valuable customers, spending on average 10x more in a year than a typical DIY customer. We are successfully developing this customer base with our TradePro scheme having a great first half, sales up 14%. And of course, we're delighted to have announced that we've hit our target of 1 million total members, a real milestone in the TradePro success story. As we explained at our Capital Markets event earlier this summer, we're now focused on growing the number of active customers. You can see from the chart on the bottom right that this cohort has been growing steadily and now stands at over 0.5 million, which is an increase of 116% on 2018. At Wickes, we pride ourselves on always having the best availability and best price on the lines that matter most to our customers. Our strategy is to have a highly curated range of around 9,000 SKUs in-store, supplemented by additional products online, and we're always striving to adapt and innovate our products offering to meet the demands of today's consumers. With that in mind, we carry out a regular drumbeat of range reviews. And in the first half, we undertook 10 reviews with strategic emphasis on introducing new and innovative products in our core categories, such as acoustic wall panels, new garden trellis and pergola products, with the customer journey improved by new in-store graphics and packaging. And finally, on this slide, as I alluded to earlier, we've seen an improvement in current trading in our Retail business, with strengthening like-for-like sales so far in Q3. With the backdrop of a softer market for larger ticket purchases, this has inevitably impacted sales of our Bespoke Kitchen ranges. However, our focus on developing a value-led ready to fit kitchen proposition with the relaunch of Wickes Lifestyle Kitchens is proving highly complementary to our Bespoke ranges. Wickes Lifestyle Kitchens are very popular with customers, sales up 19% in the half. Customers love that they can get a beautiful kitchen designed by one of our fantastic design consultants for under GBP 3,000, and an increasing proportion of customers are choosing to use this service. And these Lifestyle Kitchens' sales have been instrumental in holding our total ordered sales of all kitchens, bathrooms and associated installations, at actually just minus 4% compared to half 1, 2023. For our showroom, Bespoke Kitchen and Bathroom ranges, we have taken a number of steps to simplify the customer journey by rebalancing the number of touch points along the way and introducing new technology and services. Important components include field service management tools for our installer teams, a new online booking system that gives customers direct digital access to their design consultants diary and a new Customer Experience Center, where a dedicated project manager is assigned to every customer. These enhancements have resulted in a better customer experience and reduced operating costs. We continue to see high participation of customers choosing to use the Wickes Installation Service to undertake their home improvement projects with more than one in two projects now using our installers. And encouragingly so far in Q3, we are seeing a stabilization of performance in Design & Installation trading. Now here's a preview of the new TV advert, which we'll be running next month, so you get to see how we're promoting Wickes Lifestyle Kitchens for under GBP 3,000 showcasing there both Lifestyle and Bespoke ranges together. [Presentation]

So as you can see, it's a fantastic product at a great price, and we're really getting behind the more affordable volume end of the kitchen market. Staying within our Design & Installation business, I'll now turn to the new kid on the block, Wickes Solar. Solar is an exciting market in long-term growth. Forecast to be worth GBP 1.5 billion in the U.K. by 2028. We see a great opportunity to be a trusted brand in what is currently a highly fragmented market. And with decades of experience providing Design & Installation services at scale, we are well placed to enter in a meaningful way and build a position of leadership. Our acquisition of a majority stake in Solar Fast completed at the end of May, and in recent weeks, we've launched point-of-sale assets in 50 trial stores and the customer digital journey is now live on the Wickes website. Whilst it's still very early days, we've been encouraged with the response so far, both in terms of leads and conversion. The initial indications are that this is a really good fit for our brand. We're seeing good levels of engagement from customers who are clearly happy to buy their solar installation from Wickes. Been a busy first half for our property team. They've refitted three stores into the new format and opened two brand-new stores in Long Eaton and Durham, creating some 60 new jobs. We continue to see a good return on capital around 25% of our refitted stores and 179 stores are now in the new format. And as you can see here on the slide, just what a difference our refit program makes to a store. We're on track to deliver our 2024 plans with four more stores to be refitted in the second half, along with two new openings, including Aberdeen, which opened just 2 weeks ago. And we're supporting the energy efficiency of our new stores by adding solar where we can. For example, in our new Aberdeen store, it's got solar panels and we -- our own Solar Fast team actually installed those. Our built-to-last strategy is going from strength-to-strength as recognized by entry into the FTSE4Good index. Across the three pillars of the strategy, we delivered some great results in the first half, and I'll just highlight a couple of them. With the newly appointed government very much focused on flexible working, we're pleased to be ahead of the curve and have already rolled out flexible working opportunities to all store management teams and support center roles. We're also on the Scope 3 task force of EDRA/GHIN, which is the global trade body for the home improvement industry, and we're among the first signatories to its global Scope 3 commitment. And it's an honor to have our efforts recognized and a credit to all of my colleagues for their work in making this happen. So in conclusion, we've been pleased with our performance in the first half, particularly our Retail business, we have continued to grow sales and market share, demonstrating the strength of our balanced business model. As we enter the second half, we are encouraged by an improved picture in current trading across both Retail and our Design & Installation business. This, combined with our productivity program, underpins our outlook for adjusted PBT. We're delivering attractive returns to shareholders. And importantly, we're continuing to invest in our growth levers. So that as the U.K. economy recovers, we are well placed to capitalize on the growth opportunities this presents. Thank you for listening. Mark and I, we are happy to take any questions that you have.

Kate Calvert from Investec. Two questions for me. The first one is just on the OpEx that you had some great control in the first half. I'm just wondering if you could give us a feel for, is that sustainable going forward? Or was there some shift in some sort of shorter-term costs like marketing and things like that, that could come back if demand starts to pick up? And then the second question is just looking into next year. Do you have any early thoughts on how many new stores you might open and refits as well?

You do the OpEx question. I'll do the stores question.

Yes. Yes. So these -- the productivity initiatives that we've had are sustainable and we'll build through into next year as well. You mentioned marketing. There's been no pullback on marketing very much in line with the plan that we had for the year and previous years. And the productivity initiatives, there were no sort of big ones this year. It was a lot of small initiatives that have each contributed right across whether that's energy reduction store productivity, distribution initiatives and also a reduction in store costs through shrinkage, which has been a real focus for us and back to the trend of the wider retail market. So all of those things will stand us in good stead for next year.

Just responding to the property aspect of the question. Our expected cadence over the coming sort of 4, 5 years is around 4 to 5 stores per year. And as I always say, we've been really disciplined with the capital here. We're trying to find the appropriate long-term white space sites, and we have a good pipeline. So good visibility on that pipeline, but a cadence of about 4 to 5 stores a year. And in terms of refits, I'd be thinking through the lens of around about 7 to 9 per year. So probably touching somewhere between a dozen plus or so stores on an annual basis, a blend of new stores and the refit program.

Shane Carberry in Goodbody. Two for me, if I can. Firstly, just in terms of the gross margin performance, if you could give me a little bit more color on the levers there and in particular, the promotional activity, maybe versus peers and things like that would be helpful. And then secondly, just in terms of the kind of value and kitchens, I'm trying to think through the amount of that, that's going into Retail versus the Design & Installation. And has that shifted now in terms of -- with the lower price kitchens, there's a little bit more coming through the Retail business? Or just how should I think about that would be helpful.

Yes. So on gross margin, the first thing to say is that, we are maintaining our strong price position in the market. The growth that we're seeing in Retail, for example, as you can see, is volume growth, and we're growing market share, and we're doing that by being price competitive as well. So we're managing gross margin in that context. That's an important starting point. We -- as a business would like to be and our everyday low pricing, we have regular customers, particularly our trade customers that want a consistency in pricing. We do offer targeted promotions, but a small number of promotions. And that's the kind of consistency and transparency that our customers want. We don't want to be dragged into high low pricing with lots of promotions. And it's that careful management that has enabled us to deliver a good, stable gross margin. It's also worth saying that the volume growth that we're delivering is exactly what suppliers want. And we're probably the only player in the market at the moment that is giving that volume growth and that does get rewarded by suppliers. So that's also supporting. The final component I would say is that there is a little bit of mix benefit in terms of the decline in our Design & Installation business. But also we're having to offset some of the mix drag, if you like, of a growing TradePro business, because that's the fastest growth part of our business. And as you know, we offer a 10% discount there. So there are a number of factors going on, but overall, a really good job by the team in managing that.

And just thinking specifically, Shane, about the Lifestyle Kitchens range. What we do is those Lifestyle Kitchens that are designed through our showroom business, that business goes into D&I, because it's taken a service as well as a product. So it's much more about our Design & Installation services and ranges. The rest remains in the Retail business as we see it today. The vast majority, as we have said, sit in Retail actually. So there's good growth there anyway and just good attraction in the Retail business. But an increasing part of the growth that we described is the fact that we've now got, this is a Design proposition for customers. Which is why I spoke to, just to sort of give you a sense of -- because really, we do think about projects in our business, which is why I said, if you actually look at all of the kitchen and bathroom projects that we do Bespoke and Lifestyle, we're actually on an ordered sales perspective in the first half, actually only down 4%. So we are really picking up some good traction in the value end of the marketplace at the moment.

Ami Galla from Citi. Three questions, if I may. The first one was on Design & Installations business. Presumably, the refits benefit that, but can you give us some color as to where is -- where are market volumes versus '19 in that sort of big ticket project business to get a sense of how far the prospect of recovery ahead? The second one was on cost inflation. Broadly in the big buckets of, say, freight, staff and property. Can you give us some color as to what are you seeing in the underlying inflationary trends in those sub-segments? And the last one was on the dedicated project manager that you now have for each customer in the sort of Design & Installation business. Per store, how many sort of dedicated PMs would you typically have at this stage? And how do we think about that growing ahead as the market recovers?

Yes. So in terms of questions, Ami, on cost. Where we're seeing the most inflation at the moment is in staffing. So as you know, we have had two consecutive years now of a 10% increase in National Living Wage, which affects a good proportion of our staff, but also, of course, has a knock-on effect on other colleagues' salaries in stores. So that's been a significant cost headwind for us. Freight is not a big cost for us generally, because only a small proportion of our COGS come from Asia, most of them, about 70% we source from the U.K., most from near Europe of the remainder and then probably 7% or 8% of our COGS come from Asia. So overall, freight cost is not a big component for us. We have seen some delays, as everyone has with what's been going on in the Red Sea, but actually, it's a small part of our business and not a big cost impact. Property, you mentioned -- we are -- we've got a very good position on property actually. About GBP 15 a square foot is what we pay on average across the estate. We are seeing good demand for high-quality retail parks for store space of around 30,000 -- 25,000, 30,000 square feet, which is where we are. But at the moment, that's not translating into higher rents and the rents that we've got are well locked into sensible uplift in terms of collars and caps on RPI and things like that. So actually, our cost base from a property perspective is in good shape. We've seen a little bit of energy cost increase in the first half relative to the first half of last year, but that's now actually going to start to decline a little bit, with energy in the market coming down, plus the initiatives that we've got going to reduce energy consumption. So I think of all of those factors, I think that's really the standout in terms of inflation is in staffing.

So just to D&I questions, Ami. In the first instance, we should probably think about the market in terms of where the leads are in the marketplace. So sort of like numbers of customers interested in getting into this journey. And broadly in the market, we're seeing somewhere in the range of sort of like minus 15% to minus 20% down in terms of leads, but it's definitely stabilizing. And that is definitely stabilizing. In terms of the dedicated program management, and we've developed tech to do this as well. So this is all run through a tech stack with an outsourced partner that we work with. So the good news is, that is a flexible resource as projects go up and down. So it's not like we're banked in the hundreds of people working here. It's in the 10s, that flexes up and down as it can do quite simply with the project flow as it comes through, which is one of the benefits of our overall Design & Installation business when we think about how we're organized with installers and with program management, we've got that flexibility of resource there. So it's a variable cost not a fixed. So we're quite nimble around that.

It's Adam Cochrane from Deutsche Bank. First of all, I'd just like to say I'm quite impressed that you're putting the solar panels on the Aberdeen store. I think, if it works there, it must work in most locations.

The job went incredibly seamlessly, really, really well.

Hopefully, I get to sum up there. In terms of the...

They were just working daylight hours, it's finally they just need some.

In terms of the current trading, can you sort of pick out any particular categories or trends? Is it smaller projects that are improving? Or if there's anything to say on that at all? Secondly, on deflation. I know that we saw some big timber deflation coming through. How is that sort of picture of holding into any of the other categories or timber itself? And then thirdly, on the market share gains that you've seen, you have seen some market exits across various bits of the broader home improvement space at the moment. Do you think that your market share is coming from the exits of [ play ] -- I think you talked about good performance in tiling and flooring, for example. I think you've seen a few closures there. So just a little bit of a description about what's going on in the wider market, if you can?

So in terms of sort of current trading and themes and trends, I mean, I touched on it in the slides. You're absolutely right, Adam. What we're seeing is people have just been a bit more thoughtful, a bit more considered and are still doing DIY, which is great to see, by the way. So like the number of projects, we don't see an issue there. It's just how much they're spending. Interestingly, that does translate to our local trade customers as well. They're just being a lot more thoughtful about the amount of materials they buy for a job. They're not over buying, they're buying exactly what they need. And in some cases, actually, they tell us that they're recycling if they saw and stick a [ CLS ] in half. They might put the other half back in the van rather than put it in the skip sort of thing. So they're all just being a bit more thoughtful and you can see that play out. I mean, with the tremendous growth that we've seen in our customer base in the first half, 18%, 14% sales growth. So you can see we're doing really well, we're getting the customer numbers in, but they're just being a bit thoughtful as to how much they spend. And I think that trend is here and still with us at the moment. So slightly smaller projects, everybody being a bit more considered -- but of course, as a retail business, we're winning in this marketplace, because you win by attracting customers and footfall. And we're growing, customers are growing transactions quite significantly in our Retail business, particularly with Local Trade. I mean, market share, it's an interesting one, because when we get the market, although we know all of the components of the market, we don't get the named account data. So it's much harder to see where you're winning share from. But we are consistently growing share. I do think we do, do a good job in terms of outperformance and probably, probably getting more than our fair share when some may disappear from the market in certain core categories, particularly when you look at decor and tiling and flooring in some of these categories, I think we're getting a little bit of a kicker there. But the broad thrust of this is we are outperforming in the first instance. It's an icing on the cake, not the actual driver in its first sense. And I don't know, Mark, do you want to talk to the deflation question.

Yes. So we've seen consistently in the first half between minus 2% and minus 3% inflation. The big drop in prices in timber now is kind of behind us. So we're not expecting strong deflation to continue. And if anything, I think, probably trending back towards zero over the second half, always quite hard to predict that, but we're not expecting deflation to get more severe.

Sam Cullen from Peel Hunt. I've got three also. Just coming back on TradePro. Can you give some color on, I guess, the split between average basket size and number of baskets kind of shopped in the period and how that's trending? And then just some comments around kind of the rate of pickup in the third quarter and kind of walk us through again the operational gearing in the business? And if we do see volumes recover, what -- how we should expect profits to move? And then finally, on the kind of crystal ball gazing. You've talked around where D&I is in terms of current levels of leads. How do you think about the kind of catalyst you need to see to see volumes return to that market?

So in terms of TradePro, I mean, Sam, just really building on my previous response there. It's absolutely about transactions and footfall. So this is customer growth that is driving the TradePro growth. When you get into the basket, what you can see on balance is you can see some deflation in the round, because we've been seeing deflation on the nature of those products, particularly to the timber point, despite it's stabilization more recently. And items per basket is sort of broadly about flat actually. So what is -- this is a footfall-driven growth, which is great in the first instance, because as things start to come back on both the way to purchase and the frequency, we're in the driving seat. But this is all about growth of transactions, growth of that strategic customer base which is working really well.

Yes. In terms of operational gearing affecting our profitability as things pick up, you'll have seen what happened in the profit bridge in the first half, where the drop through in the sales decline of Design & Installation flowed straight through to profit, but we were able to mitigate that with really tight management of cost and gross margin. I think that the good news is that the operational gearing works in reverse and as we see Design & Installation in particular, pickup, but alongside a strengthening Retail position, then that will be obviously good for profit going forward. So yes, it works both ways. And to Kate's earlier question, the productivity initiatives that we've put in place this year will be embedded into the business. They're not one-offs to try and address a particular short-term issue. They are longer-term improvements. You talked about catalysts for D&I. I think from a macro perspective, some of the trends that we would want to see we are now seeing. So housing transactions improving is helpful. Low interest rates, of course, will support that. Consumer sentiment is improving, as we know. All of those things, I think there's a bit of a lag between an improvement in those indicators and then big ticket items coming through, but they are all going in the right direction. The other one that we look at closer to home is in our Mood of the Nation survey every month. One of the questions we ask our Home Improve customers is their intention to buy kitchen or bathroom in the next 12 months. At the moment, that is quite a bit lower than our historical average, but it's been flat for some time. So we think we've kind of hit the bottom and hopefully, the next move that we see will be an upward one, but we haven't seen that yet. So we're still waiting to see that pick up. But we think we're probably at the bottom.

It's Matthew McEachran from Singer Capital Markets. So couple for me, if that's okay. Can we just go into the Lifestyle Kitchens sort of theme here. And just -- do you have some data now which would either say yes or no with regards to the customers that are shopping there being new to Wickes or were they already Wickes shoppers and they've just now got the ability to shop at the lower end of the kitchen range.

So without the exact data, on the basis, if you think of our classic retail tiering, we were very much in better and best in Wickes Bespoke showroom. We had a much lower presence in sort of like the good part of things. So having now reset the ranges, 11 new ranges really got behind that business. I think we're generally attracting a new customer to that category. Probably, they were a Wickes customer, somewhere in the mix. They can have been a DIY or a Local Trader. I don't have the exact breakdown of the true incrementality. What I can see is the true incrementality of the sales, which is good. And we should remind ourselves actually that 70% of all of the kitchen volume of projects in the marketplace are GBP 4,000 and below. And typically, we've operated very successfully in the top 30 and now we're starting to build out, I think, a really credible and engaging proposition in that 70% volume opportunity.

Yes. But on balance, you feel that the incremental kind of new customer wins into the rest of the business is probably modest.

No, I think they can now buy a kitchen project with us, where probably it was beyond their remit, that's where I'd be. Yes. If we look at the growth to the earlier question, what we are seeing is the engagement of the design in that new kitchen at a more affordable rate is working really well.

Okay. All right. Just a quick one on Solar and Solar Fast stake. So the 50 store trials that you've got out there at the moment in the estate, they've been branded Wickes Solar. Are you running a dual branding situation at the moment where you still got Solar Fast and Wickes Solar? Is that right? And will that be -- is that an ongoing theme? And did you test -- are you testing different gondolas? Have you gone out with different sized display units, different setups? Or is it a single consistent approach? And then the final one, obviously, you've got some encouraging trends that have come through, I think, the store trials. Do you want to give us a little flavor as to what's been going on with the online trial. I mean, I suspect that's more of a permanent development. But just give us a little flavor as to what is coming to the pipeline online as well?

I'll lead you. You chip in. So as you say, yes, 50 stores where we've put a gondola end in, and there is some variation that we're testing with a handful of them, we have got manned gondola ends with an agent that's specifically there to talk to customers about Solar. In the remainder, the majority of them, we are just using colleagues to engage with customers to talk to them about Solar. In the stores that don't have a gondola end, they have a, sort of, kind of a stand up panel in the store. So a slightly smaller presentation of Solar, but we're seeing how that goes as well. What we're testing is the messaging and the way that we present it on the gondola end, we'll get feedback from colleagues, feedback from customers and the conversations they're having. And we'll learn from that before we roll out to the rest of the estate. But what is encouraging, as David said, is that we are seeing people come through that channel. To the branding question, we're branding this as Wickes Solar. So people know that Wickes are behind us. It also says underneath in smaller letters, powered by Solar Fast, because this is the business that's delivered thousands of successful installations to customers. So we have the real credibility there. And that's the way for now that we want to brand it, and we'll see how that evolves over time. But we think adding the Wickes brand is incredibly important because as David mentioned in his presentation, this is a market that doesn't have trusted value. And although Solar Fast has the credibility of having done a lot of installations as a brand itself is not very well known -- and then online, yes, online is -- will be always on. The advantage of online is you can make lots of tweaks as you go along with stores. You've got to do that in more thoughtful ways because of the physical investment. But we are seeing people come through the online channel. And the encouraging thing is that, as David mentioned, people are going on the Wickes journey and that's translating through into solar panel installation. So we're getting sales through at the moment, about 20% of Solar Fast sales are coming from Wickes.

Okay. That's very interesting. And -- how long do you think you'll run the trial 50, kind of gondola -- before you then start making some bigger decisions?

We've been in now probably about 6 weeks, something like that. I think we'll probably need another 6 weeks or so, and then we can start to adjust and put in what we think will be the, I don't say final execution because, of course, it will always evolve, but the sort of the permanent one that will go into the wider estate.

If we -- Matthew, if we think about the end game, where are we building steps and understanding insight to get us to? The end game will be, this will be just another Design & Installation service that is provided by our business ultimately under the Wickes Banner in the same way we do, when we do tiling, flooring, joinery, kitchen, bathroom. So that's the direction of travel. What we're doing is optimizing our routes to get to that position in time.

Just a question, please, on market share. Is there any kind of particular call-outs in terms of geographies where be it in London or outside of London, outside the M25 and be it from a regional basis north versus south? And then, is the kind of the share gains being led very much by -- obviously, you talked about a lot about the innovations and the productivity gains, but also around kind of pricing? And have you actually given kind of the market share spreads in terms of where you are Retail and Design-led versus kind of comps?

The short response to the end of that question is no. In terms of the overall market share, it's a great question, but it's really interesting. It's pretty benign actually. When we look across the geography the U.K., it's pretty benign. It's -- there's no real standout regions of difference in terms of performance. So there's nothing material to talk to there. In terms of categories, I mean, we're a very strong player, as you know, not surprising in areas like building materials, timber, tiling, flooring. We have, for a few years now, been very purposeful around building out decorating garden and the more common like DIY projects where we've significantly actually outperformed more recently. So as I said, like called out earlier, decorating garden tiling, flooring, for us at the moment are really, a really strong performing categories, and we're delighted with the efforts. I mean, some of the other stuff I spoke to, I mean, acoustic wall paneling, it's quite a new and innovative category, but we're there with a phenomenal product with phenomenal value. And we're seeing really good sales. So we're delighted for some of the innovation. But the truth of the matter is innovations, of course, it's very important, particularly with the business that is 2/3 own brand. We're a very strong own brand business. But the cornerstone of that own brand is just great value every day by definition. And that's what really works in this marketplace. There's certainty and simplicity about our value, quality and our service and the digital proposition that just works so well for our customer base in the round.

Just to clarify one point on the market share, your question between Retail and Design & Installation. The market share numbers that we quote are just Retail. There isn't a reliable market for market share data for Design & Installation.

Any more questions, team? Do we have anything on the line at all?

There are currently no questions from the webcast. So happy to hand back to David and Mark for any closing remarks?

Super. Well, I'll finish where I sort of finished in the first instance. And look, I think in summary, we're really pleased with our performance in the first half, particularly in our Retail business, which does continue to grow both sales and share. And I think that just really demonstrates the power of both our properties and our balanced business model. As we've spoken about, I think at length today, look, as we entered the second half, there is -- we are encouraged by an improved picture in terms of current trading. A strengthening performance in retail and a stabilization as we see it in terms of Design & Installation at this moment, and when you combine that with our productivity program and our really good cost management, we're happy with where we sit in terms of -- in terms of PBT. And we're delighted that we can deliver great returns to shareholders, GBP 29 million in the first half. That's a really strong sort of return to the shareholder base. But at the same time, we continue to invest and as this economy starts to recover, we think we're really well placed to continue to outperform take share and grow the business. So thank you, everyone, for your time this morning. As ever, a pleasure and look forward to seeing you all soon.