Shares in Wickes rallied 8% to 191p on Tuesday, with investors looking past a lacklustre first half and focusing instead on signs that trading has kicked into a higher gear.
The home improvement retailer reported adjusted pre-tax profit of £27.6 million for the 26 weeks to 27 June, up a modest 1.1% and a touch shy of the roughly £29 million the City had been looking for. Revenue edged 2.1% higher to £865.3 million, with like-for-like sales up just 0.7%.
Hardly the stuff of an 8% pop. The real spark came from the outlook.
Wickes said trading in the third quarter had accelerated sharply, with like-for-like sales in its retail arm now running at mid-single-digit growth. Management stuck by its ambition of delivering around 10% profit growth for the full year, in line with the £54.7 million the market expects, leaning on productivity gains and lower business rates to do the heavy lifting in the second half.
The retail business, which had shrunk 1.7% in the first quarter, clawed its way back to positive territory by the second, while the design and installation arm grew like-for-like sales 3.6% across the half. TradePro, the loyalty scheme aimed at builders and tradespeople, lifted sales 5%.
Net cash finished the period at £151.6 million even after £10 million of share buybacks and £16.3 million of dividends, and the interim payout was nudged up 2.8% to 3.7p.
Peel Hunt was the more enthusiastic of the two brokers weighing in. It kept its buy rating and lifted its price target from 265p to 295p, praising a business that "continues to get a lot right in a market offering few tailwinds". The broker noted the shares had shed 23% since the start of the year and now offered a chunky 9% free cash flow yield.
Panmure Liberum was more restrained, sitting on a hold and a 210p target after flagging the profit miss.
Beyond the number-crunching, though, the message from Tuesday was clear enough. After a soggy start to the year, Wickes reckons the worst is behind it.
