REG - Kingfisher PLC - Final Results - (Part 1 of 2)
21/03/2023 07:00
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RNS Number : 5871T Kingfisher PLC 21 March 2023
Final results for the year ended 31 January 2023
Financial summary % Total Change % Total Change % LFL* Change
2022/23 2021/22 Reported Constant currency* Constant currency
Sales £13,059m £13,183m (0.9)% (0.7)% (2.1)%
Gross profit £4,795m £4,935m (2.8)% (2.6)%
Gross margin %* 36.7% 37.4% (70)bps (70)bps
Operating profit £723m £1,144m (36.7)%
Statutory pre-tax profit £611m £1,007m (39.3)%
Statutory post-tax profit £471m £843m (44.1)%
Statutory basic EPS 23.8p 40.3p (40.9)%
Net decrease in cash(±) £(555)m £(237)m n/a
Total dividend((1)) 12.40p 12.40p -
Adjusted metrics
Retail profit* £923m £1,148m (19.7)% (19.2)%
Retail profit margin %* 7.1% 8.7% (160)bps (160)bps
Adjusted pre-tax profit* £758m £949m (20.2)%
Adjusted post-tax profit* £589m £737m (20.2)%
Adjusted basic EPS* 29.7p 35.2p (15.6)%
Free cash flow* £(40)m £385m n/a
Net debt*((2)) £(2,274)m £(1,572)m n/a
* See page 5 for further details on non-GAAP measures and other terms; (±)
Net decrease in cash and cash equivalents and bank overdrafts
Highlights
· A year of solid execution
- FY performance in line with our expectations & guidance,
against strong prior year comparatives
- Total sales -0.7% in constant currency and LFL -2.1% (3-year LFL*
+15.6%)
- Sales outperforming home improvement industry growth, with 3-year
total sales CAGR((3)) of +5.9% vs market CAGR((4)) of +4.9%
- Total e-commerce sales* -9.1% (3-year growth +146%), with growth
of +3.7% in H2. E-commerce sales penetration* of 16.3% (FY 19/20: 7.9%)
- Adjusted pre-tax profit (PBT) -20% to £758m (+39% vs FY 19/20).
Statutory PBT -39.3% to £611m
- Exceeded target for 1.5°C science-based scope 1 and 2 carbon
reduction (-52.7% vs FY 16/17)
- Proposed total dividend maintained at 12.40p per share, in line
with FY 21/22
· Multiple profitable growth opportunities being pursued at pace
- Ambition of 25% e-commerce sales penetration. Successful
e-commerce marketplace launches in the UK and Iberia*; preparing roll-out in
Poland and France*
- Opened first 5 Screwfix stores in France; up to 25 new stores
planned in FY 23/24
- Record 82 Screwfix store openings in the UK & Ireland*; up to
60 new stores planned in FY 23/24
- Targeting up to 80 medium-box and compact store openings in
Castorama Poland over 5 years
- Continued focus on increasing trade penetration across all
banners. TradePoint (in B&Q) 3-year LFL sales growth of +31.5%,
outperforming core B&Q and reaching 22% sales penetration
· Well positioned to navigate FY 23/24
- Resilient underlying sales trends in the new year (February 23/24
LFL sales((5)): +0.5%)
- Maintaining strong price indices in our key markets, and
continuing to deliver value to customers
- Own exclusive brands (45% of sales) providing customer benefits
and support to gross margin %
- Effectively managing inflation, costs and inventory levels
- Comfortable with current consensus of sell-side analyst estimates
for FY 23/24 adjusted pre-tax profit((4)), with expectation of >£500m free
cash flow for the year
· Announcing new medium-term financial priorities; confident in
growth and cash generation opportunity
Thierry Garnier, Chief Executive Officer, said:
"Across all our markets, sales have remained resilient in both DIY and
DIFM/trade channels, with like-for-like sales 15.6% ahead of pre-pandemic
levels. We have maintained a sharp focus on pricing to deliver value to our
customers during this challenging period for household finances, while at the
same time managing our cost inflation pressures effectively. Strong supply
chain management has ensured good product availability and a firm grip on our
inventories.
"We continue to execute our strategy at pace and invest in our multiple growth
opportunities. We are proud of the progress our teams have made during the
year, and since the start of our 'Powered by Kingfisher' strategy. Our
e-commerce sales have increased by 146% over the last three years and we have
enhanced our online proposition with the launch of marketplace offerings in
the UK, Spain and Portugal, which are all performing strongly. Across the
Group, we are strengthening our proposition for trade customers, building on
the success of B&Q's TradePoint and the accelerated expansion of Screwfix.
Whilst it's still early days for Screwfix's ambitions in France, we are happy
with the results of the first few months of operations and planning for up to
25 more store openings this year. We are also building on our leadership
position in Poland and the attractive potential of this market by opening
seven more Castorama stores in 2023.
"We remain confident in both the growth of our industry, and in our strategic
priorities supporting growth ahead of our markets. And we are announcing today
our new medium-term financial priorities, focused on growth, cash generation
and higher returns to shareholders."
FY 22/23 Group results
· Sales down 0.7% in constant currency, reflecting strong prior
year comparatives linked to high demand for home improvement products.
Resilient sales across both retail and trade channels
· LFL sales down 2.1% and corresponding 3-year LFL up 15.6%
- Double-digit 3-year LFL sales growth across all banners
- Positive 1-year growth in Poland, Iberia and Romania; resilient
performance in France; strong prior year comparatives for the UK & Ireland
· Q4 22/23 LFL sales flat, and up 13.7% on a 3-year basis, broadly
consistent with the trend from Q3 22/23 (LFL +0.2%; 3-year LFL +15.3%)
· Gross margin % down 70 basis points to 36.7% (FY 21/22: 37.4%; FY
19/20: 37.0%), reflecting banner & category mix, and the impact in H1 of
'normalised' promotional activity and one-off logistics spend to secure/manage
seasonal and 'buffer' stock
· Retail profit down 19.2% in constant currency to £923m (FY
21/22: £1,148m; FY 19/20: £786m), largely reflecting very strong prior year
comparatives in the UK & Ireland and France
· Statutory pre-tax profit down 39.3% to £611m (FY 21/22:
£1,007m; FY 19/20: £103m), reflecting lower operating profit, including the
impact of impairments following significant increases in discount rates and
revised future projections
· Adjusted pre-tax profit down 20.2% to £758m (FY 21/22: £949m;
FY 19/20: £544m), reflecting lower retail profit, partially offset by lower
finance costs
· Free cash flow of £(40)m, down £425m (FY 21/22: £385m; FY
19/20: £191m), reflecting lower EBITDA* and one-off working capital outflow
from completion of inventory rebuild programme
· Net decrease in cash of £555m (FY 21/22: £237m), largely
reflecting lower free cash flow, and £583m of outflows in relation to
ordinary dividends and share buybacks
· Net debt up to £2,274m (31 January 2022: £1,572m), including
£2,444m of lease liabilities under IFRS 16, reflecting the net decrease in
cash. Net debt to EBITDA of 1.6x (31 January 2022: 1.0x)
· Total dividend per share proposed of 12.40p (FY 21/22: 12.40p)
Outlook for FY 23/24
· Current trading:
- February 23/24 total sales +1.9% (LFL sales +0.5%)((5))
- Underlying sales trends remain resilient, with 'big-ticket' sales
broadly flat YoY
- Expect some impact in March from adverse weather conditions and
strong comparative in Poland
· Well positioned to navigate FY 23/24:
- Targeting further market share growth
- Sales impact of c.+1.5% from net space growth, largely from
Screwfix and Castorama Poland
- Committed to active and responsive management of operating costs*
to partially offset higher staff, technology and energy costs YoY
- Expect P&L investment of c.£40m in relation to our new
businesses, including Screwfix France
· Based on the above, we are comfortable with the current consensus
of sell-side analyst estimates for FY 23/24 adjusted pre-tax profit((6))
· Expect >£500m free cash flow for the year, supported by the
unwind of working capital outflows in the prior year
· Intention to announce a new share buyback programme following
completion of the existing programme this year; subject to our capital
allocation framework and market conditions
Medium-term financial and capital allocation priorities
· Kingfisher operates in attractive markets, with new positive
longer-term trends (such as more working from home and energy efficiency
renovations) providing further support to market growth potential
· Financial priorities: Building on our industry's attractive
growth profile, the Group's medium-term financial priorities are:
- Sales to grow ahead of our markets:
§ LFL sales growth driven by our strategic focus areas including e-commerce
and marketplace, OEB, trade penetration; and
§ Sales impact of c.+1.5% to +2.5% from annual net space growth over the
medium term, primarily driven by Screwfix and Castorama Poland
- Adjusted pre-tax profit to grow faster than sales:
§ Supported by scale benefits, higher margin initiatives, operating cost
leverage, and multi-year operating cost reduction opportunities
- Strong cash generation to drive growth investment and shareholder
returns:
§ Free cash flow of c.£400m to £500m in FY 24/25, followed by >£500m
per annum from FY 25/26, supported by profit growth and ongoing inventory
self-help measures
· Capital allocation: Our capital allocation priorities are as
follows:
- Organic and 'bolt-on' inorganic growth opportunities that
accelerate our strategy. Target gross capex of c.3.0-3.5% of total sales per
annum, on average, focussed on delivering against attractive organic growth
opportunities
- Maintain an efficient capital structure, with a more prudent
position in times of macroeconomic uncertainty; maximum net leverage (net debt
to EBITDA) of 2.0x over medium term
- Progressive, sustainable dividend policy, with target dividend
cover* of 2.25-2.75x
- Surplus capital to be returned via share buybacks or special
dividends
Executing strongly against our strategic priorities
· Grow by building on our different banners:
- Record 82 Screwfix store openings in the UK & Ireland for a
total of 872 stores; up to 60 new stores planned in FY 23/24
- First 5 Screwfix stores opened in France; up to 25 new stores
planned in FY 23/24
- 7 new Castorama stores opened in Poland; targeting up to 80
medium-box and compact store openings in Poland over the next 5 years
- First two B&Q franchise stores in the Middle East have opened
· Accelerate e-commerce through speed and choice:
- E-commerce sales penetration of 16.3%, twice the level of FY
19/20. Ambition of 25% sales penetration
- 91% of all e-commerce orders picked in store
- More options for click & collect (C&C) through roll-out of
lockers in Poland; being tested at B&Q
- Adopting more last-mile delivery options, including successful
roll-out of one-hour delivery (Screwfix Sprint) and optimised carrier
management (being tested at B&Q and in France)
- Improved e-commerce order management through use of 'digital hub'
stores and better visibility of available SKUs*
- New e-commerce marketplace model successfully launched at B&Q,
Spain and Portugal (reaching 24% marketplace participation* at B&Q in
February 2023, after just 11 months); preparing roll-out of marketplaces in
Poland and France
· Build a data-led customer experience:
- Established 'Centre of Excellence' in data at Kingfisher with
expertise in artificial intelligence (AI), machine learning, advanced
analytics and data platform engineering
- New Group-developed recommendation engine implemented at B&Q
and Screwfix, driving higher click-through and add-to-basket rates as well as
faster response times
- Signed partnership with Google Cloud for infrastructure, platform
services and AI solutions
- Utilising data analytics and AI to develop tools to support better
pricing decisions, better promotional and markdown effectiveness, and enhanced
visibility of our end-to-end supply chain
- Developing opportunities to quickly monetise our data capabilities
through retail media, including advertising placed within our e-commerce
platforms and apps
· Differentiate and win through own exclusive brands (OEB):
- OEB continuing to drive affordability, product innovation and
reduced environmental impact, and carrying a higher gross margin % on average
than branded products
- Total OEB product sales of £5.8bn, up 15.4% on a 3-year LFL basis
and representing 45% of Group sales (FY 21/22: 45%)
- Good performance in kitchen, bathroom & storage and EPHC
(electricals, plumbing, heating & cooling) categories, all showing YoY
growth. All categories up on a 3-year LFL basis
- Completed roll-out of 32 new and redeveloped OEB brands to drive
differentiation between retail banners and support extended ranges
· Develop our trade business:
- Accelerated Screwfix openings in the UK & Ireland, and strong
progress in developing the proposition in France
- TradePoint (in B&Q) 3-year LFL sales growth of +31.5%,
outperforming core B&Q and reaching 22% sales penetration (FY 21/22: 20%)
- Opened 18 new TradePoint counters in the UK and first 8 counters
in Ireland
- Launched plan to grow trade customer penetration across all other
banners, including new trade loyalty programmes in Poland and Iberia, and the
introduction of new trade-focused services and OEB & branded product
ranges
· Roll out compact store formats:
- Accelerated compact store tests; opened 17 new compact stores in
the UK, France and Poland
- High street concept tests (B&Q Local in the UK, Casto in
France and Castorama Express in Poland) continue to deliver encouraging
learnings and results
- Small retail park concepts also showing positive results
- Entering final testing phase for Screwfix ultra-compact 'XSR'
store format
- Planning to launch first test of a new Brico Dépôt France 1,000
sqm format in FY 23/24
· Lead the industry in Responsible Business and energy efficiency:
- Brought forward pay awards and support for colleagues to help
manage higher costs of living
- Exceeded target for 1.5°C aligned science-based scope 1 and 2
carbon reduction, reducing emissions by 52.7% against a FY 16/17 base year
- Announced new net-zero emissions target for our operations (scope
1 and 2) by the end of 2040
- Sustainable Home Products (SHP) sales of £6.2bn, representing 47%
of Group sales (FY 21/22: 44%). Raised target for growth of SHP to 60% by FY
25/26
- 11% of Group sales from energy and water-saving products
- Developed innovative end-to-end solutions at B&Q, Castorama
France and Brico Dépôt France to help customers create personalised energy
efficiency action plans for their homes, including access to relevant products
and services
· Human, agile and lean:
- Embedding 'test and learn' culture across the Group, alongside key
leadership behaviours to support delivery of our strategy
- Strengthened talent and capability in key areas, including
technology, data and trade
- Multi-year cost reduction programmes continue to help offset
inflationary pressures
- Four further store rightsizings completed in the UK, with improved
sales densities at all locations
- Increase in net inventory YoY driven by inflation; inventory in
units (volume) down
- Stock provisioning and de-listed stock rates remain below
pre-pandemic levels
- Actions underway to further optimise supply chain, inventory
management and sourcing footprint
Footnotes
((1)) The Board has proposed a final dividend per share of 8.60p (FY 21/22
final dividend: 8.60p), resulting in a proposed total dividend per share of
12.40p in respect of FY 22/23 (FY 21/22: 12.40p). The final dividend is
subject to the approval of shareholders at the Annual General Meeting on 27
June 2023.
((2)) Net debt includes £2,444m lease liabilities under IFRS 16 in FY 22/23
(FY 21/22: £2,376m).
((3)) Represents the compound annual growth rate (CAGR) of total sales for the
UK, France and Poland between FY 19/20 and FY 22/23 (in constant currency).
((4)) Market growth (in constant currency) for the UK, France and Poland based
on a Kingfisher internal analysis covering 2,225 retailers (on a calendar year
basis).
((5)) February 23/24 total and LFL sales represents the calendar month
February 2023 compared against February 2022, in constant currency. The
figures are provisional.
((6)) Guidance assumes current exchange rates. According to Company-compiled
consensus estimates as of 14 March 2023, the current consensus of sell-side
analyst expectations for FY 23/24 adjusted pre-tax profit is £633m.
Non-GAAP measures and other terms
Throughout this release '*' indicates the first instance of a term defined and
explained in the Glossary (Section 6). Not all the figures and ratios used are
readily available from the unaudited final results included in part 2 of this
announcement. Management believes that these non-GAAP measures (or
'Alternative Performance Measures'), including adjusted profit measures,
constant currency and like-for-like (LFL) sales growth, are useful and
necessary to assist the understanding of the Group's results. Where required,
a reconciliation to statutory amounts is set out in the Financial Review
(Section 5).
Contacts
Tel: Email:
Investor Relations +44 (0) 20 7644 1082 investorenquiries@kingfisher.com (mailto:investorenquiries@kingfisher.com)
Media Relations +44 (0) 20 7644 1030 corpcomms@kingfisher.com (mailto:corpcomms@kingfisher.com)
Teneo +44 (0) 20 7420 3184 Kfteam@teneo.com (mailto:Kfteam@teneo.com)
Final results announcement and data tables
This announcement and data tables for FY 22/23 can be downloaded from the
Investors section of our website at www.kingfisher.com/investors
(http://www.kingfisher.com/investors) . You can follow us on LinkedIn and
Twitter (@kingfisherplc) with the results tag #KingfisherResults.
Results presentation
We will host an in-person results presentation for pre-registered analysts and
investors today at 09.00 (UK time) at the London Stock Exchange, 10
Paternoster Square, London, EC4M 7LS. A simultaneous live video webcast of the
presentation and Q&A will also be available via the Investors section of
our website at www.kingfisher (http://www.kingfisher) .com, and subsequently
available on demand.
For enquiries, please email investorenquiries@kingfisher.com
(mailto:investorenquiries@kingfisher.com) .
Financial calendar ((±) Dates are provisional and may be subject to change)
Q1 23/24 trading update 24 May 2023
Annual General Meeting 27 June 2023(±)
Half year results 19 September 2023(±)
Q3 23/24 trading update 22 November 2023(±)
American Depository Receipts
Kingfisher American Depository Receipts are traded in the US on the OTCQX
platform: (OTCQX: KGFHY) www.otcmarkets.com/stock/KGFHY/quote
(http://www.otcmarkets.com/stock/KGFHY/quote) .
The remainder of this release consists of seven main sections:
1) FY 2022/23 Financial performance summary and current trading
2) Group update (including 'Powered by Kingfisher' strategic plan)
3) Trading review by division
4) FY 2023/24 Technical guidance
5) FY 2022/23 Financial review and, in part 2 of this announcement, the
condensed financial statements
6) Glossary
7) Forward-looking statements
Section 1: FY 2022/23 Financial performance summary and current trading
Income statement summary
£m % Total Change % Total Change % LFL Change
2022/23 2021/22 Reported Constant currency Constant currency
Sales 13,059 13,183 (0.9)% (0.7)% (2.1)%
Gross profit 4,795 4,935 (2.8)% (2.6)%
Retail profit:
UK & Ireland 603 794 (24.0)% (24.0)%
France 195 221 (11.9)% (12.0)%
Poland 148 135 +9.4% +12.4%
Iberia 9 12 (27.9)% (28.0)%
Romania((1)) (10) (11) +7.3% +7.4%
Other(±) (30) (10) n/a n/a
Turkey (50% joint venture) 8 7 +19.8% n/a
Other International* 125 133 (6.6)% (1.8)%
Retail profit 923 1,148 (19.7)% (19.2)%
Central costs* (49) (60) (18.6)%
Share of JV interest and tax (4) (2) n/a
Operating profit 870 1,086 (19.9)%
(before adjusting items*)
Net finance costs (112) (137) (18.4)%
Adjusted pre-tax profit 758 949 (20.2)%
Adjusting items (147) 58 n/a
Statutory pre-tax profit 611 1,007 (39.3)%
(±) 'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and results from franchise agreements.
LFL sales by quarter
Quarterly sales % LFL Change
Q1 22/23 Q2 22/23 Q3 22/23 Q4 22/23 FY 22/23
UK & Ireland (15.8)% (7.1)% (2.3)% +0.2% (6.9)%
-B&Q (18.3)% (7.4)% (3.5)% (3.0)% (8.8)%
-Screwfix (10.9)% (6.4)% (0.5)% +4.9% (3.4)%
France (3.7)% (2.3)% +0.5% +0.4% (1.4)%
-Castorama - (1.0)% +0.8% +0.5% -
-Brico Dépôt (7.5)% (3.7)% +0.2% +0.2% (2.9)%
Other International +37.1% +8.1% +6.7% (1.0)% +11.2%
-Poland +54.5% +8.9% +7.6% (2.8)% +13.8%
-Iberia (0.3)% +4.4% +3.4% (0.7)% +1.9%
-Romania((2)) +13.9% +5.3% +4.2% +10.7% +7.8%
Group LFL((3)) (5.4)% (2.8)% +0.2% - (2.1)%
Total e-commerce sales((4)) (26.1)% (10.4)% +2.0% +5.4% (9.1)%
3-year LFL sales by quarter
Quarterly sales % 3-year LFL Change
Q1 22/23 Q2 22/23 Q3 22/23 Q4 22/23 FY 22/23
UK & Ireland +16.7% +15.3% +12.9% +16.2% +15.3%
-B&Q +16.3% +17.1% +13.1% +16.6% +15.8%
-Screwfix +18.0% +11.0% +12.4% +15.3% +14.2%
France +13.7% +13.8% +14.6% +10.9% +13.2%
-Castorama +13.9% +13.5% +16.6% +12.6% +13.9%
-Brico Dépôt +13.5% +14.1% +12.7% +9.3% +12.5%
Other International +22.2% +25.7% +23.1% +12.7% +21.5%
-Poland +22.8% +25.2% +21.3% +9.4% +19.8%
-Iberia +11.8% +18.8% +19.8% +16.2% +16.7%
-Romania((2)) +32.8% +46.7% +34.6% +29.6% +38.0%
Group LFL((3)) +16.2% +16.7% +15.3% +13.7% +15.6%
Total e-commerce sales((4)) +163.9% +149.9% +137.2% +135.2% +146.1%
Trading in Q4 22/23
LFL sales were flat in Q4 and up 13.7% on a 3-year basis, broadly consistent
with the sales trends seen in Q3. E-commerce sales were up by 5.4% in Q4,
supported by the continued strong growth momentum from B&Q's e-commerce
marketplace. Sales remained resilient across our regions and customer segments
(DIY* and DIFM*/trade), with double-digit 3-year LFL growth in the UK &
Ireland, France and Other International. This resulted in trading in line with
our expectations, supported by our focus on execution and market share gains.
In the UK, Screwfix saw a strong improvement in its 1-year and 3-year LFL
trends from Q3 to Q4, supported by strong demand from trade customers. In
France, 1-year LFL trends were similar from Q3 to Q4, with 3-year growth
remaining in the double-digits. As expected, France's 3-year LFL slowed in Q4
(relative to Q3) due to a significantly stronger 3-year comparative in Q4
19/20 relative to the first nine months of FY 19/20. France LFL sales in Q4
19/20 were over eight percentage points higher than the first nine months of
FY 19/20.
Castorama Poland grew slightly faster than the market in Q4, though the market
itself was impacted by macroeconomic challenges and significantly adverse
weather conditions, especially in the latter part of the quarter. Iberia's
sales trend was lower in Q4 due a very strong comparative quarter, while
Romania saw strong growth on a 1-year basis and continued strength in its
3-year trends, driven by strengthening competitive positions and effective
trading activities.
Current trading in Q1 23/24
February 23/24 total sales were up 1.9%, with LFL sales up 0.5%((5)). The main
driver was a good performance in the UK & Ireland, with LFL sales growth
at both B&Q and Screwfix. In France, Castorama delivered flat LFL sales
YoY, while Brico Dépôt's LFL sales were down due to the timing of
promotional campaigns. Both banners were also impacted by the national pension
reform strikes. Castorama Poland's LFL sales were down, against a strong prior
year comparative (its LFL sales were +11.4% in February 2022, driven by a
successful promotional campaign).
We have seen resilient sales trends in our 'big-ticket' categories (i.e.,
kitchen, bathroom & storage), along with our surfaces & décor and
tools & hardware categories. E-commerce sales continue to progress well,
supported by the continued strong growth of B&Q's e-commerce marketplace
(which reached a marketplace participation of 24% in February - i.e.,
B&Q's marketplace gross sales* divided by B&Q's total e-commerce
sales).
We expect some impact in March from adverse weather conditions and a strong
comparative in Poland.
Footnotes
((1)) Kingfisher's subsidiary in Romania historically prepared its financial
statements to 31 December. In the prior year (FY 21/22), Romania migrated to
Kingfisher's financial reporting calendar (year ended 31 January). Its retail
loss presented in FY 21/22 therefore included one additional month of results
(January 2022) in order to facilitate the alignment to Kingfisher's financial
reporting calendar. Reported and constant currency variances for Romania's
retail loss are for February 2022 to January 2023 (compared against January
2021 to January 2022).
((2)) Further to footnote 1 above, Romania's LFL and 3-year LFL sales growth
compares equivalent periods in the current and prior years.
((3)) Group LFL includes total e-commerce sales, and excludes Koçtaş
(Kingfisher's 50% JV in Turkey). Other International and Group LFL on a 3-year
basis exclude Russia. (Kingfisher completed the sale of Castorama Russia on 30
September 2020.)
((4)) Total e-commerce sales are first-party e-commerce sales plus marketplace
gross sales. Please refer to the glossary in Section 6 for definitions.
References to digital or e-commerce sales growth relates to growth in constant
currency and covers the total Group. 3-year total e-commerce sales growth
excludes Russia.
((5)) February 23/24 total and LFL sales represents the calendar month
February 2023 compared against February 2022, in constant currency. The
figures are provisional.
Section 2: Group update (including 'Powered by Kingfisher' strategic plan)
At Kingfisher, we believe a better world starts with better homes.
In June 2020, we announced our strategic plan - 'Powered by Kingfisher'. This
plan aims to maximise the benefits of combining our distinct retail banners
(which serve a range of different customer needs) with the scale, strength and
expertise of the Kingfisher Group. We believe this combination, effected
through a balanced local-Group operating model, enables us to deliver on our
purpose of helping to make better homes accessible for everyone, while
addressing the many profitable growth opportunities we see in the home
improvement market.
The differentiation of our retail banners across trade (Screwfix, TradePoint),
discounters (Brico Dépôt France, Brico Dépôt Iberia), and more general DIY
needs (B&Q, Castorama France, Castorama Poland, Brico Dépôt Romania,
Koçtaş) is a unique strength for us; more so in a more volatile and
uncertain world.
Equally, Kingfisher's scale and resources are a critical source of competitive
advantage for our banners, providing Group-wide OEB product development and
supply, leading-edge technology platforms and digital capabilities,
international sourcing and buying scale, data-driven tools, products &
services, shared services and best practices, and cost and inventory
management support.
We are pleased with the progress we have made over the last three years. The
business has executed strongly against its core strategic priorities in order
to power its retail banners, leading to stronger propositions for our
customers and market share growth. Sales growth in the UK, France and Poland,
which together represent c.95% of Kingfisher's sales, has outperformed the
growth of the home improvement industry, with a 3-year total sales CAGR of
5.9% compared to a market CAGR of 4.9%.
This has been achieved against the backdrop of an extraordinary operating
environment, which has presented challenges as well as opportunities for our
business. Reflecting the fast-moving world in which we live, we've adapted our
strategic focus areas to ensure data, trade, culture and agility are given
increased prominence and focus, and to better align to our investments for
growth in multiple areas of the business.
The following section covers the progress made to date against our key
strategic focus areas under the refreshed pillars of 'Powered by Kingfisher':
a) Grow by building on our different banners
b) Accelerate e-commerce through speed and choice
c) Build a data-led customer experience
d) Differentiate and win through own exclusive brands (OEB)
e) Develop our trade business
f) Roll out compact store formats
g) Lead the industry in Responsible Business and energy efficiency
h) Human, agile and lean
a) Grow by building on our different banners
Our retail banners occupy number one or two positions in all our key markets.
These banners address a diverse range of customer needs, each operating
different models tailored to these needs, with clear positionings and plans.
Our goal is to grow by building on our different formats in existing and new
markets, leveraging the power of Kingfisher.
With the business in a strong position, our banners are investing for growth.
B&Q (UK & Ireland) and Castorama (France) continue to build
world-class omni-channel propositions for DIY, DIFM and trade customers alike,
with stores at the heart of their strategies. For B&Q in the UK, we
believe there are around 50 catchments or geographic 'white spaces' where
B&Q is currently under-represented. Please refer to 'Roll out compact
store formats' below for further details of B&Q and Castorama France's
evolving store footprint.
B&Q's trade-focused banner, TradePoint, is the Group's fastest growing
banner over the last three years with a 3-year LFL of +31.5%, reaching 22%
sales penetration within B&Q. The business aims to extend its presence
within B&Q's existing stores in the UK, having opened 30 new trade
counters over the last three years and launching in Ireland in all B&Q
stores in FY 22/23. Please refer to 'Develop our trade business' below for
further details of TradePoint's progress and plans.
Further increasing engagement with trade customers is a key driver of
Kingfisher's growth ambitions. Screwfix, the UK's number one trade retailer,
continues to expand through its capital-light and high-return small format
outlets. In FY 22/23 the business opened 82 stores, including 72 in the UK and
10 in Ireland, bringing the total number of stores to 872 in both countries as
of 31 January 2023. Ultra-convenience remains a key differentiator for
Screwfix, and the business plans to open up to 60 more stores in the UK and
Ireland in FY 23/24, keeping it on track to reach its medium-term goal of more
than 1,000 stores.
As part of its international expansion plans, Screwfix launched as a pure-play
online retailer in France in April 2021. Following encouraging results and
learnings over an 18-month period, including customer NPS scores on a par with
Screwfix UK, the business opened its first store in France in October 2022 and
ended the financial year with five stores in operation. During the year, the
business successfully implemented a tailored IT operating system, opened its
first French distribution centre, onboarded a strong selection of local and
national vendors, and accelerated its marketing efforts. In FY 23/24 the
business plans to open up to 25 further stores, with the pace of these
openings being determined by the trading environment, the strength of brand
awareness, and the speed at which customers are embracing Screwfix's
innovative business model. The business is well positioned to start taking
share from the large trade segment in France, which has an estimated total
market size of over €29bn. We are pleased with the first few months of
operations and, assuming the success of the format is confirmed, we see the
potential for more than 600 stores in France over the longer term.
Brico Dépôt France is one of the global home improvement industry's best
hard discounters. With its 123 stores in France, strong sales densities, and
agile & lean operating model, the business is well positioned to penetrate
more of the geographic 'white space' that exists in France. In FY 23/24, Brico
Dépôt France will test its first ever compact store - a 1,000 sqm format.
In Poland, Castorama is the market leader and the most trusted and reputable
home improvement brand. During the year, the business strengthened its
position through investments in new OEB-driven product ranges, new services
for customers, and the rapid development of its e-commerce proposition. In FY
22/23, it opened seven new stores, bringing its total to 97 stores. The
business has a proven track record of expansion, delivering attractive returns
on invested capital. It plans to address the significant 'white space' that
exists in Poland through 80 medium-box and compact store openings over the
next five years.
In Turkey, Kingfisher's 50% joint venture, Koçtaş, opened 129 mostly compact
stores in their financial year to 31 December 2022, bringing its total store
count to 355. The growth opportunity for the home improvement industry in
Turkey is significant, and in FY 23/24 the business plans to open over 80 new
stores, supported by Koçtaş' innovative 'Fix' compact store format.
A common thread is that compact stores are a key enabler for expansion in all
our banners and markets. The customer demand for speed and convenience is
driving the need for a wider network of smaller and more easily accessible
stores, and so we believe compact stores unlock the opportunity for rapid
expansion into smaller cities and geographic 'white spaces'. Please refer to
'Roll out compact store formats' below for further details.
Longer term, we also believe new markets, franchise and wholesale models could
be an attractive source of growth. In FY 22/23 we opened our first two
franchise stores under the B&Q banner in the Middle East, now supported by
an e-commerce platform that was launched in February 2023. The stores and
support office functions are fully operated and staffed by the Al-Futtaim
Group (https://www.alfuttaim.com/ (https://www.alfuttaim.com/) ).
b) Accelerate e-commerce through speed and choice
We plan to accelerate our e-commerce sales, with the ambition of reaching 25%
e-commerce sales penetration. We will do this by building on our progress over
the last three years to further enhance speed, choice and convenience for our
customers, supported by our e-commerce marketplace and data-led propositions.
Furthermore, as we facilitate the development of more customer-centric digital
tools and services, this will drive the growth of our digitally-enabled
sales*.
E-commerce sales remain significantly ahead of pre-pandemic trends, driven by
improvements to our e-commerce proposition that offer our customers more
convenience, broader product choice and faster fulfilment of orders, powered
by our store assets. We are now pivoting towards the next phase of our
e-commerce journey with a stronger focus on acquiring and retaining digital
customers, further improving e-commerce channel economics, scaling our
e-commerce marketplace offering, and accelerating the development of
data-driven products and solutions (please refer to 'Build a data-led customer
experience' below for further details).
Total e-commerce sales, which includes gross sales from third-party e-commerce
marketplace transactions, as well as first-party e-commerce sales*, were
£2.1bn in FY 22/23. This represents an increase of 146% on a 3-year basis,
and a decline of 9% YoY (in constant currency). Overall e-commerce sales
penetration was 16.3% (FY 21/22: 17.9%; FY 19/20: 7.9%).
Sales from C&C, our most popular online fulfilment channel, were down 12%
YoY reflecting very strong prior year comparatives, although remain ahead of
pre-pandemic levels with growth of 180% on a 3-year basis. C&C accounted
for 87% of total e-commerce orders (FY 21/22: 87%) and 71% of total e-commerce
sales (FY 21/22: 73%). The popularity of this fulfilment channel has been
supported by significant enhancements to the options available to customers to
collect their orders, including car park collection capabilities in France, as
well as contactless 'drive-thru' collections in both France and Poland for all
our medium-box and larger stores. During the year we completed the roll-out of
C&C lockers to all Castorama Poland stores and continued testing C&C
lockers at some B&Q stores. Our new store format trials are also
increasing C&C options for customers, in particular through our high
street compact stores which allow us to expand into city centres.
Home delivery sales were down by just 2% YoY, and up by 91% on a 3-year basis
reflecting the development of our e-commerce marketplace and same-day delivery
propositions. Faster fulfilment is a key competitive advantage for our
banners, in particular over 'pure-play' online peers, so we have increased our
focus on next-day and same-day home delivery. In August 2021, Screwfix
launched Screwfix Sprint, offering delivery direct to home or site within one
hour. Sprint is currently available from over 300 stores, covering c.45% of UK
postcodes. The average number of products in a Sprint order is approximately
50% higher than a C&C order, and feedback from our customers has been
strong. Our focus in FY 23/24 is to drive higher customer awareness and
adoption of Sprint from a wider trade customer base. In H2, B&Q and our
banners in France began testing an optimised carrier management service, with
the potential to provide greater efficiency and convenience for customers (for
example, by improving the order cut-off for next-day home delivery orders by
two hours).
Moving to store-based picking and fulfilment has been critical in enabling us
to serve our customers more efficiently. This also gives us the ability to
flex up or down in response to short term changes in demand, without being
exposed to high fixed costs. In FY 22/23, we picked 91% of the Group's
e-commerce orders in store (excluding Screwfix: 89%). We also continue to
leverage our stores to improve the speed and cost of home deliveries,
introducing a new order management tool in the UK during the year which
utilises B&Q's hub stores to cast a wider net for the availability of
products ordered online, thereby lowering the rate of abandonment of online
baskets. At present, 53 B&Q stores are being used as 'digital hubs' for
fulfilling home deliveries, serving nearly 100% of UK postcodes. These hub
stores are selected based on their catchment and the depth of their in-store
range. Similar models have been introduced at Castorama France and Castorama
Poland.
Expanding customer choice is a key driver of our e-commerce ambitions. Using
scalable technology built by Kingfisher alongside Mirakl, the leading
marketplace platform provider, we launched our first e-commerce marketplace on
B&Q's diy.com in March 2022. There are now approximately 400 carefully
selected third-party sellers on diy.com, with products across 18 home
improvement categories, enabling B&Q to offer over 340,000 additional home
improvement SKUs, compared to its previous offer of c.40,000 products.
B&Q's marketplace has grown quickly since its launch, reaching a
marketplace participation of 24% in February 2023 (i.e., B&Q's marketplace
gross sales divided by B&Q's total e-commerce sales). In November, we
launched e-commerce marketplaces in Brico Dépôt Spain and Portugal. Over the
medium term, further rapid expansion of the number of SKUs is planned, and in
addition we are preparing for the roll-out of marketplaces in Poland and
France.
Across all our banners, we continue to optimise the website and mobile user
experience through Group-driven technology and capabilities, resulting in
faster page-loading times, enhanced 'search, shop and pay' features, and new
mobile tools and features. During the year, Brico Dépôt France implemented
Fasterize, a software-as-a-service solution, resulting in a 30% improvement of
its website's speed and page-load times. We also continued to test different
payment options online, with 'Buy Now, Pay Later' and 'Pay in Instalments'
options now available via PayPal in the UK and France. Following the
successful launch of ApplePay and GooglePay on diy.com, our UK trade customers
can now also use these features on tradepoint.co.uk.
Mobile remains our largest and fastest growing channel (versus desktop and
tablet) and has performed strongly compared to pre-pandemic levels, up 260% on
a 3-year basis. Sales through the mobile channel declined in FY 22/23 by 10%,
with a decline of 19% in H1 followed by a 1% increase in H2. Mobile sales
accounted for 54% of our first-party e-commerce sales (FY 21/22: 51%),
representing an increase of 18 percentage points versus FY 19/20.
Our retail banners are providing customers with unique, app-first experiences
such as Screwfix Sprint, together with features that enable greater customer
convenience and self-service within our stores. Since its launch in February
2021, the new Screwfix app has been downloaded more than 2.8m times,
accounting for 23% of its e-commerce sales (compared to the previous version
of the app which accounted for 4% of e-commerce sales). In H1, Brico Dépôt
Iberia successfully launched its trade customer loyalty app, and trialled an
extension for non-trade customers in H2 with positive early results.
More broadly, Kingfisher's digitally-enabled sales were 24% in the year (FY
21/22: 26%; FY 19/20: 20%), highlighting that nearly a quarter of Group sales
are from e-commerce channels and online orders placed in-store, delivered
through pick-up in store or direct to customer homes. We expect
digitally-enabled sales to continue to grow over time, in line with the
continued evolution of both customer behaviours and our in-store technologies
and solutions.
An example is our now app-integrated 'Scan & Go' service in B&Q, Brico
Dépôt France and Brico Dépôt Iberia, which allows customers to scan their
purchases as they shop and transact quickly upon checkout. We are also testing
different approaches to make our fuller/extended range of products visible to
customers even when not immediately available in-store. Screwfix has now
completed the roll-out of their digital catalogue across the entire UK estate.
Furthermore, B&Q and Castorama France continue to optimise and improve
their in-store digital ordering terminals, with B&Q trialling QR codes in
some smaller format stores to bridge from the 'convenience range' on-shelf to
the fuller/extended range available for delivery or next-day C&C.
Finally, NeedHelp, our home improvement services marketplace, is now
operational in the UK, France, Poland, Switzerland, the Netherlands and
Belgium. In FY 22/23, we saw good growth of the platform, with a 22% increase
of the gross merchandise value of completed jobs. During the year, Lapeyre and
Alinea launched partnerships with NeedHelp in France and tests were launched
with Darty and Conforama stores.
c) Build a data-led customer experience
We are increasingly embedding data within Kingfisher. Our banners are
leveraging data to build customer-centric tools and solutions, support better
commercial decision-making, and unlock significant new sources of revenue and
profit for the Group.
Data powering growth
Since early 2021 we have been focused on developing new data capabilities for
our banners. This has involved building new human and technical foundations to
allow us to drive growth, efficiencies and improved customer experiences using
data.
We have established a 'Centre of Excellence' in data - specifically in
artificial intelligence (AI) and machine learning, advanced analytics and data
platform engineering. This expertise is being leveraged across Kingfisher to
address commercial opportunities within our banners and Group functions.
In 2021 and 2022 we focused our efforts on customer data and personalisation
in order to drive customer loyalty, and retain customers acquired during the
pandemic. We continue to see new customer growth above 2019 levels, with
strong revenue retention of customers acquired in 2021 (103% of revenue
retained after 12 months). To support these efforts, we have put new
technology and data foundations in place. These included rolling out a new
customer data platform at Castorama France to support their omni-channel
marketing, deploying new data science and marketing automation tools at
Screwfix, and developing new customer segmentations and algorithmic
recommendation services to improve customer journeys and drive sales at
B&Q. As an example of this, during the year B&Q implemented a new
product substitution algorithm to help minimise lost online sales, and has
expanded its range of customer contact points via in-app notifications and
tailored in-store couponing.
During the year Kingfisher developed its first in-house recommendation engine,
employing state-of-the-art machine learning and AI technology, to provide a
more personalised shopping experience for our customers. The technology has
been implemented at B&Q and Screwfix, with further roll-out in other
banners planned this year. Although in its early stages, the new
recommendation engine is already outperforming the existing solution on
diy.com (+11% click-through rate, +4% add-to-basket rate and 3.5x faster
response times), while also providing an opportunity to improve the speed and
security of our websites by removing reliance on third-party providers. In
addition, the new recommendation engine has been designed to scale and support
our e-commerce marketplace products.
Finally, in addition to new in-house capabilities, we have established several
strategic partnerships to accelerate our progress in data. These include a
partnership with Braze to support us in developing more personalised customer
communications; with ContentSquare to help us build seamless customer journeys
with enhanced digital analytics; and with Google on cloud data and AI-based
technologies.
Data powering profit
Through our investments in data capabilities, learning more about our
customers, and c.1 billion customer visits across our e-commerce touchpoints,
we're now pivoting our data strategy to create new sources of growth and
profit.
We're leveraging our capabilities to create a data-driven tool that will
support more efficient pricing decisions for better margin realisation, and
increase the effectiveness of promotional, markdown and clearance campaigns.
Development work has commenced on this product, with implementation in our
banners expected this year.
We are also developing a supply chain visibility tool to provide our banners
with real-time and end-to-end visibility of products from factory to store.
The transparency over our supply chain networks will enable our banners to
optimise inventory levels and replenishment cycles, resulting in higher
availability, reduced inventory days, shorter product lead-times, higher
profitability and, over time, improved demand forecasting. Additionally,
Kingfisher is exploring the monetisation of our visibility tool by providing
suppliers with real-time access to stock level data for their products,
allowing them to better forecast demand and manage production times.
We are also developing opportunities to generate new sources of revenue for
the Group by monetising through retail media - i.e., advertising placed within
our e-commerce platforms and apps. Over the next three years, the global
retail media market is estimated to grow at a c.16% CAGR to c.$190bn. Many
large retailers are already monetising their existing e-commerce channels
through selling advertising space for brands to purchase. With c.1 billion
customer visits across our e-commerce touchpoints, Kingfisher is very well
placed to benefit from this retail mega-trend. Along with our significant
online traffic, many of our suppliers - including leading national and
international home improvement brands - could become advertisers. Retail media
is attractive for advertisers because it enables more precise targeting of
advertising to customers during their buying journey (e.g., advertising during
the product search stage, basket-build stage, or at the point of sale) to
build brand awareness and drive product sales. In February 2023, through a
technological partnership with CitrusAd, Castorama France commenced online
advertising for product display and sponsored search, which is the first of
many developments to follow in this area. Over time, we see the potential for
retail media revenues to reach up to 3% of the Group's total e-commerce sales.
These initiatives are all underpinned by a pan-Kingfisher roll-out of a common
data platform, using cloud-based technology. We are convinced that our ongoing
investment in this area will drive faster, simpler and more efficient
decision-making. The same capability will enable the simple use and re-use of
data for business intelligence and analytics, as well as the direct deployment
of AI-based technologies to power services for customers.
d) Differentiate and win through own exclusive brands (OEB)
We believe that our OEB product development is a significant source of value
for our retail banners and their customers. OEBs provide us with the ability
to differentiate ourselves from the rest of the market by delivering simple,
innovative and sustainable solutions, at affordable prices. OEBs also carry a
higher gross margin (on average) than branded products. We aim to grow our OEB
sales further, as we bring even more innovative and affordable solutions to
our customers.
The performance of our OEB ranges in FY 22/23 was resilient against very
strong prior year comparatives, with LFL sales down 3.2%. LFL sales for OEB
were up 15.4% on a 3-year basis, performing in-line the growth of non-OEB
ranges. Total OEB product sales were £5.8bn, representing 45% of Group sales
(FY 21/22: 45%). This is particularly impressive when considering our retail
banners' renewed focus on offering more choice to customers through a wider
range of local and international branded products. Kingfisher's top five OEBs,
based on their breadth of differentiated ranges, innovation and growth
potential, are GoodHome, Verve, Erbauer, Magnusson and Cooke & Lewis.
These contributed 20.2% of total Group sales (FY 21/22: 19.5%; FY 19/20:
14.3%).
During the year, we redefined our OEB strategy around three core pillars:
innovation, affordability and sustainability. Moving forward, all new product
launches and range reviews will stringently address each of these three
pillars.
With many households in our markets impacted by the rising cost of living,
this has strengthened our resolve to deliver affordable prices to our
customers by leveraging our OEBs. Our OEB products are, on average, 15-30%
cheaper than branded products (for example, our Erbauer brand compared to its
branded power tool competitors, and our Titan pressure washers compared to its
main branded competitor). We achieve this by maintaining strong range
management practices across the OEB offer, strengthening the offer in the
lowest selling price quartile, and developing the 'permanent' OEB range with
banners to form the core of their offer, which is complemented by additional
banner-specific ranges.
We also remain focused on designing innovative products to make home
improvement projects easier, by developing a much deeper understanding of
customer needs at every step of the home improvement journey. We are
developing disruptive and uniquely designed OEB products to simplify choice
and give our customers more confidence to complete projects. An example of
such innovation is our new mounting plate system for our range of door handles
and knobs, designed to fit any existing door and removing the need to drill
new screw holes. We also have plans to launch new flooring ranges in FY 23/24
with an easier-to-install 'click and drop' solution.
We are leveraging our OEB capabilities to provide differentiated and
specialised products for our general home improvement, trade and discounter
banners. Over the last two years, we have created an overall portfolio of 32
new and redeveloped OEBs, enabling our banners to differentiate both between
themselves and also from branded products within their customer proposition.
The roll-out of these OEBs was completed in H2, and we are now working towards
further extending the new OEB pipeline. Examples include our Flomasta
trade-focused radiators, launched initially in Screwfix, and the Turbo
high-performance screw range marketed to Screwfix trade customers. Evalux, a
high-performance discount paint range sold only at Brico Dépôt France, has
performed strongly since its launch in early 2022. During H1 we relaunched
GoodHome paint in all our general home improvement banners to create an
unrivalled paint offering with a curated range of ready-mixed colours,
alongside our tinting offer which increased choice to 2.2 million colours. The
relaunch also included our first bio-based paint, Naturéa. At B&Q and
Screwfix, respectively, we have launched new featured ranges for MacAllister
and Titan power tools incorporating a better battery platform, whilst keeping
our selling prices low, helping to make home improvement projects easier and
more cost-efficient. One of our key focus areas in FY 23/24 is to drive higher
customer awareness and adoption of these new brands.
Our OEB kitchen ranges continue to receive strong customer feedback on design,
innovation and value for money. It remains one of our top-performing new
ranges for the Group and has been a key contributor to our banners' market
share growth. Supported by market-leading price positioning, installation
services and an enhanced in-store sales journey, the Group LFL sales
performance of the OEB kitchen ranges was positive in FY 22/23, and up by over
50% on a 3-year LFL basis. The performance of our OEB kitchen ranges at
Castorama Poland has demonstrated our ability to create a new market
opportunity having the right combination of offer, price and service,
delivering LFL sales growth of over 40% in FY 22/23.
We are also continuing to embed sustainability considerations at the core of
the OEB proposition, all the way from the product design and development
phase, through to the procurement and manufacturing phase. Sustainable Home
Products (SHPs) aim to either help our customers reduce their environmental
impact (such as solar panels, water-saving taps or loft insulation) or are
intended to have a reduced impact on the environment because of their input
materials or how they are manufactured (for example, FSC timber, peat-free
compost or recycled plastic). In FY 22/23, 56% of OEB product sales were SHPs
(FY 21/22: 55%). Please also refer to 'Lead the industry in Responsible
Business and energy efficiency' below for further details on how we are using
OEB to drive further SHP growth.
e) Develop our trade business
Trade customers are an integral part of the home improvement ecosystem and a
key priority for Kingfisher. Trade customers tend to visit more frequently and
spend more than the average retail customer. The significant opportunities to
engage further with trade customers include the further roll-out of trade
counters, international expansion, digital enhancements, range expansion,
loyalty programme optimisation, improved merchandising, more partnerships and
new services.
Screwfix, the UK's number one trade retailer, continues to expand through its
capital-light and high-return small format outlets. The business now operates
872 stores in the UK and Ireland, and five stores in France where it launched
in April 2021 (with its first store opening in October 2022). Please refer to
'Grow by building on our different banners' above for further details.
Screwfix is a well-established, large and proven business that has significant
penetration of trade customers in the UK, with approximately 75% of Screwfix's
sales coming from tradespeople. It leverages Kingfisher for trade-focused own
exclusive brands, technology, sourcing, shared services and best practices.
Another blueprint for our ambitions in trade is B&Q's trade-focused
banner, TradePoint, which continues to build strong foundations for growth.
TradePoint's LFL sales outperformed the rest of B&Q (and Screwfix) in FY
22/23, down just 1.2% for the year and with growth in H2. TradePoint's 3-year
LFL sales were up 31.5% in FY 22/23, bringing the business to £833m of sales,
representing 22% of B&Q's total sales (FY 21/22: 20%). Looking forward, we
have put together a strong plan to drive TradePoint's annual sales to more
than £1bn in the medium term, centred around growing its customer base and
increasing its share of trade customer spend through a greater focus on
project-related spend. Work is underway to develop and grow TradePoint's
loyalty programme, to implement new trading approaches, update and expand
TradePoint's store counters, implement new trade-specific ranges and services,
and enhance the business' digital and online experience.
More broadly, we believe there is a significant opportunity to increase trade
customer penetration across all other retail banners, benefitting from our
expertise in Screwfix and through TradePoint's successful relaunch. Over time,
we expect increased trade customer penetration to contribute to higher sales
and profit growth. During the year we launched a 'Centre of Excellence' in
trade at Kingfisher, bringing together experts from across our banners and
Group functions to share knowledge, insights and feedback from customers. We
also aligned our trade strategy across six key pillars: store formats, people,
services, product range, pricing and loyalty and digital.
Within store formats we have opened 30 new TradePoint counters over the last
three years in the UK, for a total of 181 counters currently in operation.
These include small format counters that have been implemented in smaller
B&Q stores unable to cater for the fuller TradePoint proposition. We are
also continuing to make progress updating our legacy TradePoint counters, with
29 stores refreshed during the year. In addition, we successfully launched
TradePoint in Ireland in FY 22/23, in all eight B&Q stores. We continue to
explore the potential for dedicated trade counters in our banners in France,
Poland and Iberia. Castorama Poland is also taking learnings from France to
test more efficient builders' yards. In Romania we have plans to adapt our
in-store B2B desks to extend support to smaller trade customers.
In people, we are reorganising our team structures and colleague roles at
TradePoint to drive higher engagement through building more direct and
personalised relationships with trade customers. In Brico Dépôt France we
are trialling the placement of trade project advisers in-store to provide
dedicated support to our trade customers - both in-person and remotely via
direct-to-store 'pro hotlines'. In Iberia, trade project advisers also now
provide dedicated support to trade customers, and we will be testing similar
initiatives (both in-store and via our contact centres) across all banners in
FY 23/24.
In services, our tool rental partnerships with SpeedyHire (at 33 B&Q
stores) and Loxam (at 41 Castorama France stores) provide trade customers with
heavy machinery and tooling, delivered both in-store and nationwide via our
digital platforms. Payment facilities and cash flow are also key
considerations for our trade customers to successfully operate their
businesses. Our dedicated TradeUK proposition continues to provide credit
facilities for use across both B&Q and Screwfix. Dedicated financial
products for the trade are also being explored in France, Poland and Iberia.
Fulfilment is also of crucial importance to the trade, with nationwide crane
delivery rolled out by Brico Dépôt France during the year, and
direct-to-site delivery, next-day delivery and 'timed delivery' slots all
being tested and explored. Furthermore, our responsible waste services in
partnership with AnyJunk and LoveJunk are delivering positive results in the
UK, with plans to increase awareness and adoption in the coming year.
Within product range, we are leveraging our strength in OEBs to develop and
roll out trade-focussed products for our banners. As an example, during the
year we launched our new OEB Erbauer 12V power tool range in Screwfix and
Castorama France. The 12V ecosystem provides a more compact range to our 18V
offer, bringing power tool capabilities to smaller areas, ideal for
tradespeople working in confined spaces or on more intricate work where larger
tools are inefficient. The new range of OEB Flomasta steel panel radiators has
also been launched, designed with a deeper understanding of our plumbers and
heating engineers' needs. Alongside positive customer feedback on installation
and use, the range is driving higher sales and profitability compared to our
previous offer. Our banners are also reviewing and extending the availability
of key trade brands within their markets (for example, extended Makita and
Bosch ranges in Brico Dépôt Iberia).
In pricing and loyalty, we are testing and rolling out dedicated trade loyalty
programmes in Poland and Iberia to establish and maintain strong customer
relationships, building on successes at TradePoint and Screwfix. Following
positive results and adoption rates, these programmes will be further
developed across both markets in FY 23/24. In addition, we are driving
adoption of our existing loyalty scheme at Brico Dépôt France through our
'pro' targeted trials. Improvements to the TradePoint programme are also in
development, to increase access to membership information for both customers
and colleagues to maximise opportunities for higher customer spend. Several of
our banners are also testing new pricing mechanisms to drive higher sales,
while maintaining competitive trade pricing.
Finally in digital, Screwfix Sprint continues to deliver essential items to
trade customers within one hour, available exclusively through the Screwfix
app. In 2023, TradePoint will strengthen its digital proposition to make
membership tracking and purchases easier to complete. Increased
personalisation is a key area we are expanding, leveraging our expanding data
and analytics expertise to bring more relevant offers and content to known
trade customers.
f) Roll out compact store formats
Stores play a critical role in the home improvement market. They serve as a
'one-stop shop' for projects, enabling customers to be inspired, to visualise
and 'try before they buy', and receive customised advice and services from
in-store experts. Over the last three years they have also played an integral
role in meeting elevated demand via e-commerce channels, whether through fast
C&C or delivery to where the customer wants it. We believe that compact
stores will play an increasingly crucial role in addressing the consumer need
for both speed and convenience. Through compact store expansion, our ambition
is to grow market share, optimise our overall store footprint, and to grow
sales densities and store profitability.
As set out in the section above, 'Grow by building on our different banners',
a common denominator through the plans of many of our businesses is that
compact stores are a key enabler for expansion. We are convinced of the need
for a wider network of smaller and more easily accessible stores, and believe
compact stores unlock the opportunity for rapid expansion into smaller cities
and geographic 'white spaces' where larger stores are not suitable.
We are clear however that any space growth must be subject to our strict
returns criteria, and balanced as part of our overall view on store footprint.
While compact store growth will increase our overall store numbers, our aim is
to reduce the average size of our stores. We aim to achieve this over time by
opening more compact stores (less than 2,000 sqm), rebalancing any larger size
new store opening programmes (e.g., at Brico Dépôt France and Castorama
Poland) to mostly focus on medium-box stores (2,000 to 8,000 sqm), and
'rightsizing' or repurposing space within many of our larger format big-box
stores (more than 8,000 sqm).
To date we have made good progress in testing different concepts to unlock the
compact store opportunity. During the year we added 17 additional compact
stores, bringing the total to 41 in operation as of 31 January 2023. These
stores span three markets and four retail banners (B&Q, Screwfix,
Castorama France and Castorama Poland), located in high streets, small retail
parks and within supermarkets (as concession outlets). Following an extensive
review, in February 2023 we decided to end our B&Q 'grocery concession'
format test with ASDA in eight stores to instead focus our resources on
developing the blueprint for high street and small retail park stores.
Our high street concept tests (300-800 sqm) continue to deliver encouraging
learnings and results. We now have 12 high street concept stores open in the
UK, France and Poland, including eight within B&Q. We continue to learn
from these tests with the aim of creating a scalable high street concept. The
latest two B&Q compact stores (Palmers Green and Camden, both in London)
are the first to sit under the new B&Q Local sub-banner, offering an
immediate 'take-away' convenience offer in prominent locations with high
footfall. Similar concepts are being tested in Castorama France (three Casto
stores, including two opened in Paris in February 2022) and Castorama Poland
(one Express store, opened in August 2022).
Our small retail park store concept tests (800-2,000 sqm) are currently within
B&Q (four stores) and in Poland (five stores, where they trade under the
Castorama Smart sub-banner). During the year we opened one small retail park
store in the UK and three in Poland. The concept allows us to bring our core
offer into smaller footprints and catchments, while offering a stronger
showroom inspiration and more complete project journey than is possible within
high street stores. Overall, these stores continue to see positive results,
especially those within the 1,500-2,000 sqm subset.
These stores, along with our high street formats, support the longer term
roll-out strategies at B&Q, Castorama France and Castorama Poland, which
is to increase penetration in small towns and cities.
We are also planning to launch the first test of a new Brico Dépôt France
1,000 sqm format in FY 23/24.
Screwfix continues to test its ultra-compact 'XSR' store format, which has
been developed to take the core Screwfix range into spaces unable to cater for
the full traditional trade counter offer. We now have 11 'XSR' stores trading
across various location types, including six such stores opened during the
year, and are seeing promising results especially in small market towns. We
are entering our final testing phase for these formats, ahead of potential
integration into Screwfix's store network plans in the UK.
g) Lead the industry in Responsible Business and energy efficiency
We are committed to leading our industry in responsible business practices.
Building on our strong Environmental, Social, and Governance (ESG)
credentials, our 'Powered by Kingfisher' strategy sets out four priority areas
for Responsible Business where we can maximise our positive impact on the
lives of our customers, colleagues, communities and the planet. As the 'green
homes' agenda accelerates, we see considerable potential for our Sustainable
Home Products, in particular in the UK and France where the governments have
made 'net zero' commitments. The ongoing energy crisis adds weight to the
urgent need for governments to increase their support of greener homes and
energy efficiency.
Our priorities are underpinned by our commitment to our 'Responsible Business
Fundamentals'. These are the many issues and impacts we need to measure and
manage, to ensure we continue to operate responsibly across our business. We
have clear policies in each of these areas, including health and safety,
responsible sourcing, cyber security and data protection, and ethical conduct,
to ensure we take a consistent best practice approach across our banners.
We continue to make strong progress against our four Responsible Business
priorities:
Colleagues: Becoming a more inclusive company
· Our 82,000 colleagues are at the heart of our business, helping
our customers to make their home improvement plans a reality.
· To deliver the best possible service to our customers and ensure
that each of our colleagues is engaged, fulfilled and able to realise their
full potential, we are building a culture based on trust, agility, inclusion
and curiosity, which we track through frequent colleague engagement surveys
and listening forums. Our colleague satisfaction scores are currently within
the top 5% of worldwide retailers. Please refer to 'Human, agile and lean'
below for further details.
· With colleagues across Europe and Asia, we are proud of our
cultural diversity which is a strength. We continue to focus on broader
actions to promote stronger levels of inclusion and diversity across our
entire organisation, thereby creating a more innovative and engaged workforce.
We are continuously listening to our colleagues, including from our 16
Affinity Networks, and acting on their ideas about how we can build a more
inclusive culture.
· In FY 22/23 we reached 25.8% women in our senior leadership team
(FY 21/22: 25.2%) and 38.9% in management roles (FY 21/22: 37.9%). While we
are making strong progress against our women in management target of 40% by FY
25/26, this year we will strengthen our actions to improve progress against
our women in senior leadership target of 35% by FY 25/26.
· Throughout the year we actively monitored the rising cost of
living across our markets, taking swift action to support colleagues in our
stores and head offices. On colleague pay, for example, salary increases or
one-off payments were awarded in the UK, France, Poland and Iberia, focused
disproportionately on store colleagues. We also put additional measures in
place to support colleagues facing potential financial hardship, such as our
Colleague Support Fund in the UK (in partnership with the Retail Trust), and
extended colleague discounts on energy-saving products to help reduce
household bills in the UK, Iberia and Romania.
· We are investing in inspiring opportunities for colleagues to
learn and grow with us. During the year, colleagues completed more than 2.6
million hours of 'skills for life' learning, bringing the total number of
hours completed since FY 19/20 to 6.6 million learning hours - surpassing our
skills for life target of 5 million learning hours more than two years ahead
of schedule. A new target linked to apprenticeships and learning will be
established in the coming months. Across the Group, we had over 4,600
apprentices in FY 22/23.
· We also continue to invest in talent and capability to support
our growth ambitions. During the year, we recruited deep functional expertise
in key areas, including technology, data, e-commerce and marketplace, and OEB.
In addition, new and highly skilled teams have been built to develop Screwfix
in France.
· Our attrition levels and the time it takes to hire new colleagues
are either in line with, or better than, retail industry benchmark levels.
Planet: Becoming Forest Positive and helping to tackle climate change
· In July 2022, we announced a new target to reach net-zero for our
operations (scope 1 and 2) by the end of 2040. Achieving this means we would
reduce absolute emissions by at least 90% against a FY 16/17 base year, and
neutralise our residual emissions, in line with the requirements of the
Science Based Targets initiative (SBTi) Corporate Net-Zero Standard.
· Achieving our near-term 1.5°C aligned science-based scope 1 and
2 carbon reduction target (approved by the SBTi in 2021) is our first step
towards achieving net-zero carbon by FY 40/41. The target is to reduce
emissions by 37.8% by FY 25/26.
· In FY 22/23 we exceeded this target, reducing our carbon
footprint for our own operations (scope 1 and 2 emissions) by 52.7%(FY 21/22:
24.5%; FY 19/20: 19.6%), against a FY 16/17 base year.
· During the year we accelerated our actions to achieve sustained
emissions reductions, which has driven the majority of our rapid progress. We
also implemented shorter-term tactical measures to reduce gas and electricity
consumption in light of the global energy crisis. While these tactical
measures will likely reverse, to an extent, in the near-term, the more
strategic measures put in place mean we are confident of maintaining
outperformance against our science-based targets out to FY 25/26.
· Our actions in FY 22/23 to deliver sustained emissions reductions
included the extension of our programme to purchase electricity from zero
carbon sources, supported by Renewable Energy Certificates in all our markets.
· Further actions included the continued roll-out of LED lighting
in stores, installing or retrofitting air source heat pumps across our
Screwfix stores in the UK, and the trialling and deployment of fuels with a
lower environmental impact and electric vehicles across our delivery fleets.
As of 31 January 2023, over 500 of Screwfix's 872 stores were heated with air
source heat pumps, with further roll-out expected this year.
· Our 1.5°C aligned scope 3 target requires us to achieve a 40%
reduction (per £'million turnover) from purchased goods and services and use
of sold products by 2025, against a FY 17/18 base year. By the end of FY 21/22
we had reduced emissions from energy-using products by 1.4 million tonnes of
CO2e, versus FY 17/18. This takes account of a product's estimated lifetime
carbon emissions from energy use. This has reduced the intensity of our
emissions from the supply chain and customer use of products by 19.7%. We will
report further progress against our scope 3 emissions reduction target in our
FY 22/23 Responsible Business Report, to be published in Q2.
· We are a founding member of the UN's Race to Zero Breakthroughs -
Retail Campaign (https://racetozero.unfccc.int/breakthroughs/) , a partnership
aiming to inspire more of the world's retailers to take action on climate
change.
· Kingfisher has a strong heritage in sustainable forestry and the
responsible sourcing of wood and paper. In line with our commitment to be
'Forest Positive' by 2025:
- 94% of the wood and paper used in our products is responsibly
sourced (FY 21/22: 87%), including 100% of catalogue paper, putting us on
track to achieve our target of 100% by FY 25/26.
- B&Q, Screwfix, Castorama France, Brico Dépôt France and
Castorama Poland have all established local partnerships to restore, create
and protect native woodland and forests.
Customers: Helping to make greener, healthier homes affordable
· In FY 22/23, £6.2bn of sales, representing 47% of Group sales
(FY 21/22: 44%), were from Sustainable Home Products (SHPs). This has more
than doubled since we established the programme in FY 11/12.
· SHPs aim to either help our customers reduce their environmental
impact (such as solar panels, water-saving taps or loft insulation) or are
intended to have a reduced impact on the environment because of their input
materials or how they are manufactured (for example, FSC timber, peat-free
compost or recycled plastic).
· In July 2022, we announced a new ambitious target for SHP sales
to reach 60% of Group sales by FY 25/26 (previous target 50% by FY 20/21). We
are also targeting 70% of OEB product sales to be from SHPs by FY 25/26 (FY
22/23: 56%).
· Sustainability is a key pillar within the core design principles
we apply in developing our OEB ranges, and we remain focused on improving
sustainability performance through each change that we make. For example, we
are fully phasing out peat at B&Q (Kingfisher's biggest seller of compost
by volume), we have removed solvents from further paint lines (e.g., through
the launch of Naturéa, Kingfisher's first ever bio-based paint), integrated
recycled plastic into more products across several product categories, and
increased the longevity and repairability of some of our product ranges.
· We also see considerable potential across all our markets as the
'green homes' agenda accelerates, in particular in the UK and France, where
the governments have made 'net zero' commitments. We are developing
opportunities to increase engagement with DIY and trade customers in this
agenda:
- In FY 22/23, Kingfisher derived 11% of Group sales from energy and
water-saving products. We are very well placed in energy efficiency categories
such as loft insulation, LED lighting, underfloor heating and electric
radiators, and are exploring other product solutions.
- Screwfix is selling photovoltaic (PV) panels and air-source heat
pumps to the trade and is exploring further options in this market.
- During the year we expanded our range of energy-saving products
and services to better support customers to improve energy efficiency at home,
while also helping them to save money.
- In Q4 we launched energy-saving solutions in the UK and France, to
help customers create personalised energy efficiency action plans for their
homes, and then access the relevant products and services via B&Q,
Castorama France and Brico Dépôt France and their partners to take action.
We have seen a very positive take-up of these services in both markets, with
high demand for expert advice on energy-saving products and encouraging
conversion rates amongst those customers receiving a quote for work.
- Alongside energy-saving products sold directly by our banners, we
have partnered with organisations to address the installation of more
pervasive recommendations including boiler replacements, photovoltaic (solar)
panels, and roof and interior/exterior wall insulation.
- In H2 Castorama France added solar panel installation to their
existing offer of boilers, wall and roof insulation, windows, doors,
ventilation and log-burner solutions. In the last month B&Q have also
added solar and storage (battery) installation to their roster of partners
within their energy-saving service.
- The customer experience in Castorama France has also been improved
by launching an online simulator to simplify the process and help customers
navigate the costs and expected rebates under the French government's
MaPrimeRénov subsidy programme for energy efficiency projects in customers'
homes. MaPrimeRénov has gained significant traction in France.
Communities: Fighting to fix bad housing
· In FY 22/23, we invested £5.4m in our communities, with our
colleagues and customers raising an additional £2.8m. We reached over 470,000
people through our charitable partnerships and banner Foundations.
· This brings our total to 2.1 million people helped since FY
16/17, thereby achieving our target of 2 million people three years ahead of
schedule. A new target will be set later this year.
· All our retail banners have established charitable Foundations.
The Screwfix Foundation, which has been running since 2013, recently passed
the significant milestone of £10m raised in aggregate, supporting over 2,200
organisations over this period.
· Our Foundations partner with national charities including Shelter
and Macmillan in the UK, Fondation Abbé Pierre in France, and Habitat for
Humanity in Poland and Romania.
· Kingfisher responded rapidly to the war in Ukraine, with all our
retail banners actively fundraising and seeking donations across their
markets. We donated c.£0.5m to help organisations such as the International
Red Cross and the UNHCR with their relief efforts. This included matched
funding for colleague donations to the Red Cross Ukraine Crisis Appeal
amounting to £68k.
· In late August 2022, torrential rains flooded Pakistan, impacting
33 million people. We donated to the International Red Cross Red Crescent
Movement to support their humanitarian efforts.
· To support the ongoing Turkey and Syria earthquake relief
efforts, we have made donations to the Disasters Emergency Committee, with our
banners sending supplies to help survivors who lost their homes. Castorama
France and Castorama Poland worked with our sourcing office in Turkey to
transport heaters to affected communities. Koçtaş, our joint venture in
Turkey, has provided vital supplies including blankets, lamps, picnic stoves,
electric heaters and sleeping bags, as well as training and equipping
rescuers.
Governance and Reporting
Our Responsible Business Committee (RBC) of Kingfisher's Board supports the
governance of Responsible Business and monitors performance against our
priorities. The RBC is chaired by Sophie Gasperment, a non-executive director
(NED) of the Board, and includes a further NED, our Group CEO, and other
members of the Group Executive.
The Group Ethics and Compliance Committee (GECC), created in 2020, oversees
the implementation of critical compliance initiatives, sensitive
investigations and KPIs, supported by banner-level committees. The Group
Committee is chaired by our Group CFO. In July 2022, we established a Group
Climate Committee (GCC), a sub-committee of the Group Executive, with the
primary purpose to agree and monitor the Group's approach to meeting its
emission reduction commitments for 2025 and 2040, climate-related external
reporting, and assessing and managing climate-related risks. The Committee is
chaired by our Group CEO and includes other members of the Group Executive.
Responsible Business measures are integrated into our long-term incentive plan
(known as the Kingfisher Performance Share Plan), which is granted to members
of our senior leadership team. The performance conditions attached to the
vesting of awards include 25% weighting on ESG measures. More information on
this will be provided in our 2022/23 Annual Report and Accounts.
Kingfisher has a £550m sustainability-linked revolving credit facility, which
enables us to benefit from a lower interest rate when we deliver on ambitious
sustainability and community-based targets under the Group's Responsible
Business plan.
We align our reporting with the Sustainability Accounting Standards Board
(SASB) standards for Multiline and Speciality Retailers and Distributors, and
the Global Reporting Initiative (GRI). Furthermore, we have been working to
improve our understanding of the financial impacts of climate-related risks
and opportunities, in line with the approach set out by the Task Force on
Climate-related Financial Disclosures (TCFD). Further information will be
provided in our 2022/23 Annual Report and Accounts.
We continue to rank highly in external benchmarks and indices, including:
· MSCI: We rank as a 'Leader', having received the highest-possible
'AAA' score, which was achieved by only 5% of companies in the Retail -
Consumer Discretionary sector.
· CDP Climate Change: We improved our performance to achieve a
leadership score of 'A' (previously 'A-'). We are amongst fewer than 300
companies globally that achieved an 'A' grading in 2022 and we score higher
than the average discretionary retail performance of 'C'.
· Sustainalytics: We continue to rank highly when compared against
our sector peers - ranked second out of 43 in home improvement retail and
fourth out of 487 in the wider retailing industry.
· Workforce Disclosure Initiative: We received a disclosure score
of 81%, which is ahead of the average consumer discretionary sector score of
66% and average disclosure score (all companies) of 68%.
· ISS ESG Corporate Rating: We achieved a 'C+' rating. This is
supported by our 'Prime' status, which is given to companies that are
perceived to be sustainability leaders in their industry.
· FTSE4Good: Kingfisher is included in this index, with a rating of
4.6 out of 5 ('Strong' performance).
For further information on our Responsible Business strategy, performance and
governance, please visit the Responsible Business section of our website at
www.kingfisher.com (http://www.kingfisher.com) , and our FY 22/23 Responsible
Business Report (due to be published in Q2).
h) Human, agile and lean
To deliver the best possible service to our customers and ensure our
colleagues are engaged, fulfilled and able to realise their full potential, we
are building a culture based on trust, agility, inclusion and curiosity. We
are adopting a 'done is better than perfect' mindset in order to move faster
and with more agility, given the rapidly changing environment in which we do
business. We also realise the need to be leaner and more productive, and are
making changes to lower our costs and same-store inventories. And through the
use of our scale, we expect to extract further value from sourcing and buying.
Human and agile
To support an agile and inclusive culture, led by trust, we are continuing to
listen to our colleagues and measure their engagement across the Group,
through formal and informal mechanisms. We conducted our most recent
Group-wide colleague engagement survey in June 2022. We heard from 83% of
colleagues (up 4% versus last year), with colleagues sharing 317,000 comments
(up 10%). Our Employee Net Promoter Score (eNPS) of 54 is significantly ahead
of the global retail benchmark (+16 points above the median), placing us in
the top 5% of worldwide retailers.
In FY 22/23, we launched our new 'Leadership Behaviours' framework, which
encourages our senior leadership team to embody values including customer
centricity, inclusivity, curiosity and agility. Beginning with our leaders and
cascading throughout our workforce, these behaviours capture the key aspects
of our culture that will help deliver our strategy.
Strong progress has also been made on delivering our inclusion plans. In FY
22/23, we established a new 'Inclusion & Diversity Forum', chaired by the
Screwfix CEO, bringing together senior leaders and representatives from our 16
Affinity Networks across the Group to share best practices and further develop
our action plans. A UK data collection campaign was also launched during the
year across B&Q, Screwfix and Kingfisher head office colleagues, helping
us to analyse the inclusivity of our HR policies and systems and help identify
where further action may be required to build a fair and equitable culture in
the business.
Since the launch of 'Powered by Kingfisher' in September 2019, we have worked
to embed our Group-banner operating model to ensure that our banner teams are
empowered to deliver for their customers. There continues to be an ongoing
focus to embed our 'done is better than perfect' culture of experimentation
and pace, enabling an agile mindset and building trust between teams.
During the year we strengthened our Kingfisher 'Centres of Excellence' in
supply chain, trade, compact stores, data, technology, and e-commerce &
marketplace. These centres provide technologies, resources and
industry-leading best practices to ensure our banners can move with speed and
agility - for example, in launching our e-commerce marketplaces at B&Q and
Brico Dépôt Iberia in FY 22/23.
We continue to focus on further strengthening our capability in key areas that
will support the delivery of our strategy; for example, in-sourcing a greater
proportion of software engineers and recruiting additional expertise in trade
and data.
Lean - costs
Over the last three years we've implemented multiple programmes to reduce
costs across Kingfisher over a multi-year period. The initiatives cover store
productivity, goods not for resale (GNFR*), supply and logistics, overheads
and property (including lease renegotiations and rightsizings). These
programmes are robustly governed both at Group Executive and Board level.
While we are not disclosing the expected net savings from our multi-year cost
reduction programmes, they are expected to partly offset the cost of
inflation, expansion and space changes, and the investment requirements of our
business over the medium term. They are also key to unlocking our targeted
profitability improvements in France.
The following areas contributed to partially offsetting cost growth in FY
22/23:
· Store productivity - We increased colleague productivity through
implementing new store operating procedures, and the use of technology such as
self-checkout terminals, app-integrated 'Scan & Go', improved digital
ordering terminals, and QR code enabled in-store ordering. Self-checkout
terminals have now been rolled out across B&Q, Castorama France and
Castorama Poland, with roll-out underway at Brico Dépôt France. Adoption in
all banners is well ahead of expectations.
· GNFR optimisation - Together, our category managers with
Group-wide responsibilities and local procurement teams continue to optimise a
c.£2.7bn GNFR spend through over 220 cost reduction projects.
· Supply and logistics - Kingfisher's supply and logistics teams
continue to work on distribution centre space and network optimisation, as
well as operational efficiency in our logistics. Next to the significant
distribution centre space reductions achieved in France (cumulative space
reduction of c.27% versus three years ago), major improvements are also being
realised in the UK - for example, through the automation of Screwfix's site
in Trentham. In addition, work is underway to further optimise our supply and
logistics network through the use of data-led solutions. Please refer to 'Lean
- inventories' below for further details.
· Overheads - Savings were realised across Group and banner head
offices, including through the expanded use of our shared service centre in
Krakow, Poland.
· Property - B&Q completed 28 lease renegotiations in FY 22/23,
with an average net rent reduction of 10%, alongside improved lease terms. We
also completed four rightsizings in FY 22/23 at B&Q, further to the five
completed in FY 21/22 at B&Q and Castorama France. These rightsizings have
resulted in an average space reduction of c.30%, which in general has been
taken over by discount retailers, thereby bringing incremental footfall to the
vicinity of the stores. Since reopening, the stores have exceeded our
performance expectations, with sales density improvements of up to 50%,
improved profitability, and reductions in energy consumption of over 50%. As a
reminder, last year we announced that we expect up to 40 'big-box' stores
across B&Q and Castorama France to be rightsized over 10 years, including
the reallocation of space to e-commerce operations and fulfilment hubs. This
space reduction equates to a relatively small proportion of Kingfisher's store
estate, and approximately 3% to 4% of the combined selling space of B&Q
and Castorama France.
Lean - inventories
Our priority over the last three years has been to secure inventory and
improve availability for our customers, amidst unprecedented global supply
chain and logistics challenges, as well as to improve the quality of our
inventory. The strength and expertise of our supply, sourcing and logistics
teams has enabled us to manage our supply and logistics needs effectively.
As the impact of the COVID pandemic has significantly reduced and a more
'normalised' environment emerges, our immediate focus has been to optimise our
ordering and reduce the additional 'buffer' stock acquired since 2021, whilst
continuing to improve product availability. Product availability improved in
every quarter of FY 22/23, and we see this trend continuing into FY 23/24.
As of 31 January 2023, inventory in units (volume) was down YoY. In constant
currency, net inventory increased YoY by £240m to £3,070m (FY 21/22:
£2,749m at reported rates). Over 100% of this increase was driven by higher
product purchase prices, alongside increases related to higher levels of
'carry-over' seasonal items (which we decided to proactively purchase ahead of
forecast cost price increases), and stock to support our store expansion
programme. The increase was partially offset by lower purchases and our
strategic actions to reduce inventory. Net stock days increased by 18% YoY in
FY 22/23, up 4% versus FY 19/20.
Same-store net inventory* (in constant currency) increased by £215m (+8%). On
a 3-year basis the increase in same-store inventory (in constant currency) was
£498m (+20%), with net stock days +4% (5 days) higher than FY 19/20.
Stock provisioning and de-listed stock rates remain below pre-pandemic levels.
To drive longer term opportunities to unlock efficiencies in our supply chain
and inventory management, all our banners are deploying actions to
structurally reduce same-store inventory, including optimising our ranging and
deployment (with a focus on removing slow-moving inventory) and optimising our
replenishment systems (e.g., re-adjusting for shorter supplier lead-times and
lower security stock parameters). As described in 'Build a data-led customer
experience' above, we are also developing a data-led solution to provide
real-time visibility of our end-to-end supply chain, which will significantly
strengthen our planning and stock management capabilities as well as offering
monetisation opportunities.
Sourcing
In sourcing and buying, we continue to deliver cost and operational
efficiencies by leveraging our Group scale. By using a value engineering
approach, we continue to deliver sourcing benefits on our large OEB product
base (45% of Group sales in FY 22/23), which helped to partly mitigate the
impact of cost price inflation during the year.
We continue to make progress on our sourcing diversification plan, by
increasing our 'near-sourcing' footprint and exploring dual sourcing where
possible. Our sourcing teams are also working closely with our OEB teams on
value engineering projects, including simplifying the design of products and
optimising the end-to-end manufacturing of product components to reduce
per-unit manufacturing costs.
We are also announcing today that Kingfisher's banners in France and Mr.
Bricolage Group are working towards establishing a procurement joint venture.
The joint venture, which could be in place by H2 this year ahead of commercial
negotiations for FY 24/25, will aim to strengthen relationships with common
national and international suppliers and deliver additional value and new
business opportunities for these suppliers. Mr. Bricolage Group has over 970
stores through franchisees and affiliates, mainly in France, with c.€2.4bn
of gross sales under its different banners, and is the fourth largest player
in the French home improvement market.
Medium-term financial and capital allocation priorities
Medium-term financial priorities
In addition to refreshing our 'Powered by Kingfisher' strategic focus areas,
we are also updating our medium-term financial priorities. These priorities
reflect our continued confidence in the growth and cash generation opportunity
of Kingfisher.
We operate in attractive markets, with new positive longer-term trends (such
as more working from home and energy efficiency renovations) providing further
support to the growth potential of the home improvement industry.
Building on our industry's attractive growth profile, the Group's medium-term
financial priorities are:
· Sales to grow ahead of our markets:
- LFL sales growth driven by our strategic focus areas including
e-commerce and marketplace sales growth, OEB sales growth and higher trade
customer penetration; and
- Sales impact of c.+1.5% to +2.5% from annual net space growth over
the medium term, primarily driven by Screwfix and Castorama Poland
· Adjusted pre-tax profit to grow faster than sales:
- Supported by scale benefits, higher margin initiatives, operating
cost leverage, and multi-year operating cost reduction opportunities
· Strong cash generation to drive growth investment and shareholder
returns:
- Free cash flow of c.£400m to £500m in FY 24/25, followed by
>£500m per annum from FY 25/26, supported by profit growth and ongoing
inventory self-help measures
Capital allocation priorities
The Group's objectives in managing capital are to:
· Invest in the business where economic returns are attractive
· Maintain a solid investment grade credit rating
· Safeguard the Group's ability to continue as a going concern and
retain financial flexibility
· Provide attractive returns to shareholders
We allocate capital, subject to strict returns criteria, to organic and
'bolt-on' inorganic growth opportunities that accelerate our strategy. Our
target gross capital expenditure is c.3.0-3.5% of total sales per annum, on
average, focussed on delivering against attractive organic growth
opportunities.
To maintain a solid investment grade credit rating, our maximum net debt to
EBITDA on an IFRS 16 basis is 2.0 times over the medium term. To retain
financial flexibility, we aim to maintain strong liquidity headroom (including
cash, cash equivalents and committed debt facilities), which is currently set
at a minimum of £800m. Total liquidity as of 31 January 2023 includes an
undrawn revolving credit facility of £550m and cash of £270m (net of bank
overdrafts).
In March 2021, the Board announced a target ordinary dividend cover range of
2.25 to 2.75 times, based on adjusted basic earnings per share. We aim to grow
the ordinary dividend progressively over time.
If surplus capital remains after having achieved all the above objectives, the
Board will return surplus capital to shareholders via a share buyback
programme or special dividends.
Dividend for FY 22/23
The Board has proposed a final dividend per share of 8.60p. This results in a
proposed total dividend per share of 12.40p in respect of FY 22/23, which is
in line with the prior year (FY 21/22: 12.40p). The corresponding dividend
cover of 2.40 times is in line with our target ordinary dividend cover range
of 2.25 to 2.75 times.
The final dividend is subject to shareholder approval at the Annual General
Meeting on 27 June 2023,
and if approved will be paid on 3 July 2023 to shareholders on the register at
close of business on 26 May 2023. The shares will go ex-dividend on 25 May
2023.
Share buyback programme
In September 2021, the Board announced the return of £300m of surplus capital
via a share buyback programme. The programme completed in April 2022.
In line with our capital allocation policy described above, in May 2022 the
Board determined that a
further £300m of surplus capital was available to return to shareholders, via
a share buyback
programme. As of 31 January 2023, we had repurchased c.£193m worth of shares
under this programme, with the balance expected to be repurchased in FY 23/24.
Including shares bought back under the previous programme, we repurchased
c.£337m worth of shares in FY 22/23.
Our intention is to announce a new share buyback programme following
completion of the existing buyback programme this year. This will be subject
to the Board's evaluation against our capital allocation framework, and
prevailing macroeconomic conditions.
Section 3: Trading review by division
Note: all commentary below is in constant currency.
UK & IRELAND
£m 2022/23 2021/22 % Reported Change % Constant % LFL % 3-year LFL Change
Currency Change
Change
B&Q 3,835 4,178 (8.2)% (8.2)% (8.8)% +15.8%
Screwfix 2,365 2,327 +1.6% +1.6% (3.4)% +14.2%
Total sales 6,200 6,505 (4.7)% (4.7)% (6.9)% +15.3%
Retail profit 603 794 (24.0)% (24.0)%
Retail profit margin % 9.7% 12.2% (250)bps (250)bps
Kingfisher UK & Ireland sales decreased by 4.7% (LFL -6.9%) to £6,200m,
against very strong prior year comparatives in H1. In H2, total sales
increased by 1.5% (LFL -1.2%). 3-year LFL sales for the year were up 15.3%.
The 3-year sales trend improved to +16.2% in Q4 (versus +12.9% in Q3)
supported by resilient sales from DIFM/trade categories. Over the last three
years, B&Q (including TradePoint) and Screwfix have increased their market
shares in the UK, supported by strong engagement with new and existing
customers and higher store and online NPS scores. Gross margin % decreased by
80 basis points, reflecting 'normalised' promotional activity in H1 versus the
prior year and one-off logistics spend in H1 to secure and manage seasonal and
'buffer' stock, in addition to mix impacts. Mix impacts were the result of a
lower YoY share (versus Screwfix) of B&Q's higher gross margin % revenues
given very strong prior year sales; and unfavourable B&Q category mix
between lower margin building & joinery and EPHC (electricals, plumbing,
heating & cooling) and higher margin surfaces & décor categories.
Retail profit decreased by 24.0% to £603m (FY 21/22: £794m; FY 19/20:
£499m; at reported rates), due to the exceptionally higher sales and gross
margin % in H1 last year. In H2, retail profit increased 22.4% to £264m (H2
21/22: £215m at reported rates). Operating costs increased by 1.3%, driven by
higher costs associated with 86 net new store openings in the year, higher
technology spend, and operating cost inflation including increases in pay
rates and significantly higher energy costs. Advertising, marketing and travel
costs also normalised compared to one-off COVID-related savings in the prior
year. Increases were substantially offset through flexing our staff costs and
cost reductions achieved by our strategic cost reduction programme. Retail
profit margin % decreased by 250 basis points to 9.7% (FY 21/22: 12.2%; FY
19/20: 9.8%).
B&Q total sales decreased by 8.2% (LFL -8.8%) to £3,835m against very
strong prior year comparatives, especially in H1. Sales trends improved in H2
(LFL -3.2%) with positive LFL growth in the EPHC, building & joinery and
bathroom & storage categories. 3-year LFL sales for the year were up
15.8%. The business achieved good growth across all categories on a 3-year
basis, in particular building & joinery and outdoor. LFL sales of
weather-related categories decreased by 16% (increase of 21% on a 3-year LFL
basis), while LFL sales of non-weather-related categories, including showroom,
decreased by 6% (increase of 14% on a 3-year LFL basis). B&Q's total
e-commerce sales (including marketplace gross sales) decreased by 7% YoY,
which was a resilient performance against strong online trading in the first
half of the prior year. In H2, total e-commerce sales increased by 9%, driven
by the growth of B&Q's marketplace which has scaled rapidly since its
launch in March 2022. Marketplace reached a penetration of 22% in January 2023
(i.e., B&Q's marketplace gross sales divided by B&Q's total e-commerce
sales). B&Q's total e-commerce sales were up 130% on a 3-year basis, with
overall e-commerce sales penetration of 11% (FY 21/22: 11%; FY 19/20: 5%).
B&Q opened five small format stores in FY 22/23, including its first two
B&Q Local compact format stores, and closed one store. As of 31 January
2023, B&Q had a total of 316 stores in the UK and Ireland. In February
2023, B&Q announced that it is terminating its 'grocery concession'
partnership with ASDA in eight stores.
B&Q's trade-focused banner, TradePoint, continued to perform ahead of
expectations in FY 22/23, supported by resilient sales from trade customers.
LFL sales for TradePoint outperformed the rest of B&Q, down just 1.2% YoY,
with 3-year LFL sales up 31.5%. TradePoint's penetration of B&Q sales
increased to 22% (FY 21/22: 20%). Throughout the year, TradePoint continued to
focus on customer engagement and loyalty through targeted campaigns,
trade-only deals and events, and improvements to trade-specific product ranges
and services. E-commerce sales increased by 14% in the year as TradePoint grew
awareness of its digital offer. During the year, TradePoint opened 18 new
counters in the UK within B&Q stores, and expanded into Ireland with its
first eight counters. Further roll-out of the proposition will continue in FY
23/24.
Screwfix total sales increased by 1.6% (LFL -3.4%) to £2,365m, reflecting a
robust performance against very strong prior year comparatives, especially in
H1. In H2, total sales increased by 8.0% (LFL +2.1%), supported by good demand
from trade customers. 3-year LFL sales for the year were up 14.2%, with the
sales trend accelerating to +15.3% in Q4 versus +12.4% in Q3. Screwfix
continued to grow its market share in FY 22/23, with strong gains in the year.
Screwfix's e-commerce sales decreased by 9% YoY, again reflecting a resilient
performance against strong online trading in the first half of the prior year.
E-commerce sales were up 137% on a 3-year basis, with e-commerce sales
penetration of 60% (FY 21/22: 67%; FY 19/20: 33%). The business continued to
strengthen its digital proposition throughout the year through the
introduction of digital tablets in all stores, the launch of its product
recommendations feature in the new Screwfix app, and the continued roll-out of
Screwfix Sprint.
Space growth contributed c.5% to total sales. In FY 22/23, Screwfix opened 82
new stores (including 10 in Ireland), bringing the total to 872 as of 31
January 2023. The business remains on track to reach its target of over 1,000
stores in the UK & Ireland in the medium term.
As part of its international expansion plans, Screwfix launched as a pure-play
online retailer in France in April 2021. Following encouraging results and
learnings over an 18-month period, including customer NPS scores on a par with
Screwfix UK, the business opened its first store in France in October 2022 and
ended the financial year with five stores in operation. During the year, the
business successfully implemented a tailored IT operating system, opened its
first French distribution centre, onboarded a strong selection of local and
national vendors, and accelerated its marketing efforts. The results for
Screwfix International are captured in 'Other International' - see below for
further information.
FRANCE
£m 2022/23 2021/22 % Reported Change % Constant % LFL % 3-year LFL Change
Currency Change
Change
Castorama 2,302 2,296 +0.3% +0.1% - +13.9%
Brico Dépôt 2,150 2,202 (2.4)% (2.5)% (2.9)% +12.5%
Total sales 4,452 4,498 (1.0)% (1.2)% (1.4)% +13.2%
Retail profit 195 221 (11.9)% (12.0)%
Retail profit margin % 4.4% 4.9% (50)bps (50)bps
Kingfisher France sales decreased by 1.2% (LFL -1.4%) to £4,452m, against
strong prior year comparatives in H1. In H2, total sales increased by 0.5%
(LFL +0.5%). A resilient sales performance in DIY categories was outpaced by
sales from DIFM/trade categories. 3-year LFL sales for the year were up 13.2%.
The 3-year sales trend slowed to +10.9% in Q4 (versus +14.6% in Q3) due to a
significantly stronger 3-year comparative in Q4 19/20 relative to the first
nine months of FY 19/20. France LFL sales in Q4 19/20 were over eight
percentage points higher than the first nine months of FY 19/20. Castorama and
Brico Dépôt continued to focus on strengthening their respective competitive
positions in the market through improving their digital capabilities, product
ranges and overall customer proposition, resulting in higher store and online
NPS scores. Gross margin % decreased by 30 basis points, largely reflecting
category mix impacts. In H2, we completed our work to optimise distribution
centre space in France, resulting in a cumulative reduction of c.27% in square
metres versus two years ago.
Retail profit decreased by 12.0% to £195m (FY 21/22: £221m; FY 19/20:
£164m; at reported rates), with lower gross profit partially offset by lower
operating costs. Operating costs decreased by 0.6% due to lower staff costs
and cost reductions achieved by our strategic cost reduction programme,
substantially offset by operating cost inflation including increases in pay
rates and significantly higher energy costs. Retail profit margin % decreased
by 50 basis points to 4.4% (FY 21/22: 4.9%; FY 19/20: 4.0%).
Castorama total sales increased by 0.1% (LFL flat) to £2,302m, reflecting
resilient sales despite strong prior year comparatives in H1. Sales trends
improved in H2 (LFL +0.7%) with positive LFL growth in the EPHC and building
& joinery categories supported by energy efficiency and trade/renovation
activity. 3-year LFL sales for the year were up 13.9%. The business achieved
growth across all categories on a 3-year basis, with particularly strong
performances in the outdoor and building & joinery categories, both up by
c.30%. LFL sales of weather-related categories were broadly flat (increase of
24% on a 3-year LFL basis), while LFL sales of non-weather-related categories,
including showroom, were also flat (increase of 11% on a 3-year LFL basis).
Castorama's e-commerce sales decreased by 19% YoY, largely reflecting strong
online trading in the first half of the prior year. In H2, e-commerce sales
increased by 27% YoY. Castorama's e-commerce sales were up 240% on a 3-year
basis, with e-commerce sales penetration of 5% (FY 21/22: 6%; FY 19/20: 2%).
Castorama opened two new stores in FY 22/23; its first high street compact
store tests in Paris. As of 31 January 2023, Castorama had a total of 95
stores in France.
Brico Dépôt total sales decreased by 2.5% (LFL -2.9%) to £2,150m, again
reflecting resilient sales levels against strong prior year comparatives in
H1. Sales trends improved in H2 (LFL +0.2%) with positive LFL growth in the
EPHC, building & joinery and kitchen. 3-year LFL sales for the year were
up 12.5%. The business achieved strong growth across its outdoor, building
& joinery and EPHC categories on a 3-year basis. Brico Dépôt continues
to strengthen its discounter credentials through further differentiating its
ranges and maintaining a strong price index relative to its home improvement
peers. Brico Dépôt's e-commerce sales decreased by 20% YoY, again reflecting
strong online trading in the prior year. In H2, e-commerce sales increased by
7% YoY. Brico Dépôt's e-commerce sales were up 133% on a 3-year basis, with
e-commerce sales penetration of 4% (FY 21/22: 5%; FY 19/20: 2%). In FY 23/24,
Brico Dépôt France will test its first ever compact store - a 1,000 sqm
format.
OTHER INTERNATIONAL
2022/23 2021/22 % Reported Change % Constant % LFL % 3-year LFL Change
Currency Change
Change
Sales (£m)
Poland 1,734 1,525 +13.7% +16.7% +13.8% +19.8%
Iberia 373 366 +2.0% +1.9% +1.9% +16.7%
Romania(±) 285 279 +1.8% +1.7% +7.8% +38.0%
Other(±±) 15 10 n/a n/a n/a n/a
Other International 2,407 2,180 +10.4% +12.4% +11.2% +21.5%
Retail profit (£m)
Poland 148 135 +9.4% +12.4%
Iberia 9 12 (27.9)% (28.0)%
Romania(±) (10) (11) +7.3% +7.4%
Other(±±) (30) (10) n/a n/a
Turkey (50% JV) 8 7 +19.8% +114.8%
Other International 125 133 (6.6)% (1.8)%
Retail profit margin %
Poland 8.5% 8.8% (30)bps (30)bps
Other International 5.2% 6.1% (90)bps (70)bps
(±) Kingfisher's subsidiary in Romania historically prepared its financial
statements to 31 December. In the prior year (FY 21/22), Romania migrated to
Kingfisher's financial reporting calendar (year ended 31 January). Its sales
and retail loss presented in FY 21/22 therefore included one additional month
of results (January 2022) in order to facilitate the alignment to Kingfisher's
financial reporting calendar. Reported and constant currency variances for
Romania's total sales and retail loss are for February 2022 to January 2023
(compared against January 2021 to January 2022), whilst LFL and 3-year LFL
sales growth compares equivalent periods in the current and prior years.
(±±) 'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and results from franchise agreements.
Other International total sales increased by 12.4% (LFL +11.2%) to £2,407m,
with 3-year LFL sales up 21.5%, driven by growth in all key geographies.
Retail profit decreased by 1.8% to £125m (FY 21/22: £133m; FY 19/20: £123m;
at reported rates), largely due to an increase in losses incurred in 'Other'
operations, driven by investment in Screwfix France, and a lower retail profit
in Iberia. This was substantially offset by higher retail profit in Poland.
The retail profit margin % decreased by 70 basis points to 5.2% (FY 21/22:
6.1%; FY 19/20: 5.3%).
Poland total sales increased by 16.7% (LFL +13.8%) to £1,734m, against a
prior year comparative impacted in Q1 by the COVID-related temporary closure
of all Castorama stores (between 27 March and 3 May 2021). Notwithstanding
this, Castorama continued to attract new customers and achieved strong market
share gains in FY 22/23 by leveraging its leading market position and
competitive pricing, supported by robust sales of DIY and DIFM/trade
categories. On a YoY basis, nearly all categories achieved double-digit LFL
sales growth, with a standout performance in the kitchen category where its
new OEB kitchen ranges delivered over 40% LFL sales growth. 3-year LFL sales
for the year were up 19.8%. The business achieved good growth across all
categories on a 3-year basis, in particular its building & joinery,
outdoor, EPHC and kitchen categories. LFL sales of weather-related categories
increased by 20% (increase of 34% on a 3-year LFL basis), while LFL sales of
non-weather-related categories, including showroom, increased by 13% (increase
of 18% on a 3-year LFL basis). Castorama's e-commerce sales increased by 2%
YoY, with growth of +11% in H2. Castorama's e-commerce sales were up 285% on a
3-year basis, with e-commerce sales penetration of 5% (FY 21/22: 5%; FY 19/20:
2%).
Gross margin % decreased by 30 basis points, largely reflecting 'normalised'
promotional activity versus the prior year. Retail profit increased by 12.4%
to £148m (FY 21/22: £135m; FY 19/20: £151m; at reported rates) with growth
in gross profit partially offset by an increase in operating costs. Operating
costs increased by 16.8%, reflecting staff and operating cost inflation
including higher energy costs, space growth and new store opening costs, and
higher marketing costs. The increase in operating costs was partially offset
by cost reductions achieved by our strategic cost reduction programme. Retail
profit margin % decreased by 30 basis points to 8.5% (FY 21/22: 8.8%; FY
19/20: 10.4%).
Space growth contributed c.3% to total sales. Castorama opened seven new
stores in FY 22/23, including three big-boxes and four compact stores,
bringing its total to 97 stores in Poland.
Iberia total sales increased by 1.9% (LFL +1.9%) to £373m, reflecting
resilient sales against strong prior year comparatives. The business achieved
good YoY growth in its EPHC, building & joinery and kitchen categories.
3-year LFL sales for the year were up 16.7%, with strong performances in
building & joinery and outdoor, both up by c.30%. Retail profit decreased
to £9m (FY 21/22: £12m; FY 19/20: £2m; at reported rates), reflecting a
lower gross margin % and an increase in operating costs of 1.2%.
Romania total sales increased by 1.7% to £285m, despite the inclusion of one
additional month of sales in the prior year comparative and the impact of
COVID-related trading restrictions earlier in the year (lifted in March 2022).
On an LFL basis sales growth was +7.8%, reflecting strong YoY performances in
the outdoor, surfaces & décor and kitchen categories. 3-year LFL sales
for the year were up 38.0%. Growth in gross profit was partially offset by an
increase in operating costs of 7.1%, mainly driven by staff costs and
operating cost inflation including higher energy costs. As a result, the
business reduced its retail loss by 7.4% to £10m (FY 21/22: £11m reported
retail loss; FY 19/20: £23m reported retail loss). On a comparable basis,
excluding losses incurred in the month of January 2021, Romania's retail loss
increased by 6.8% YoY.
In Turkey, Kingfisher's 50% joint venture, Koçtaş, continued to grow
successfully against a challenging macroeconomic backdrop. The business
contributed £8m of retail profit in the year (FY 21/22: £7m; FY 19/20 £9m;
at reported rates). The business opened 129 mostly compact stores in their
financial year to 31 December 2022, bringing its total store count to 355.
'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and franchise agreements. Due to these businesses being in their
early investment phase, a combined retail loss of £30m (FY 21/22: £10m
reported retail loss) was recorded, largely driven by Screwfix France as the
business invested in the opening of its first distribution centre and stores.
As noted in the UK & Ireland commentary above, Screwfix opened its first
five stores in France following encouraging results as a pure-play only
operator. During the year, we also opened two franchise stores under the
B&Q banner in the Middle East. The stores and support office functions are
fully operated and staffed by the Al-Futtaim Group.
RETAIL BANNER EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area((1))
(FTE) numbers at 31 Jan 2023 (000s m(2))
at 31 Jan 2023 at 31 Jan 2023
B&Q 16,413 316 2,203
Screwfix 9,380 872 55
UK & Ireland 25,793 1,188 2,258
Castorama 10,509 95 1,156
Brico Dépôt 8,238 123 872
France 18,747 218 2,028
Poland 12,136 97 817
Iberia 1,777 31 195
Romania 2,542 33 238
Other((2)) 143 5 -
Other International 16,598 166 1,250
Total 61,138 1,572 5,536
((1)) Screwfix sales area relates to the front of counter area of an outlet.
((2)) 'Other' consists of Screwfix International, NeedHelp, and franchising.
Section 4: FY 2023/24 Technical guidance
Please refer to Section 7 for further details regarding forward-looking
statements.
Income statement
· Space
- Sales impact of c.+1.5% from net space growth, largely from
Screwfix and Castorama Poland
· New businesses
- 'Other' retail losses of c.£40m (FY 22/23: £30m), with increase
driven by additional investment in Screwfix France. 'Other' consists of the
consolidated results of Screwfix International, NeedHelp, and franchise
agreements, recorded within the 'Other International' division
· Central costs
- Anticipate c.£60m, in line with FY 21/22 levels (FY 22/23: £49m;
FY 21/22: £60m)
· Net finance costs
- Decrease by c.£5m as a result of lower interest expense on lease
liabilities (FY 22/23: £112m)
· Adjusted pre-tax profit
- Comfortable with current consensus of sell-side analyst estimates
for full year adjusted pre-tax profit((1))
· Tax rate
- Group adjusted effective tax rate* of c.25%((2)) (FY 22/23: 22%)
Cash flow
· Capital expenditure - targeting gross capex to be broadly flat
(FY 22/23: £449m; c.3.4% of total sales)
· Free cash flow - >£500m for the year, supported by the unwind
of working capital outflows in the prior year
· Share buybacks - c.£105m outflow for completion of current
£300m share buyback programme
· Dividends - dividend policy target cover range of 2.25 to 2.75
times, based on adjusted basic earnings per share
((1)) Guidance assumes current exchange rates. According to Company-compiled
consensus estimates as of 14 March 2023, the current consensus of sell-side
analyst expectations for FY 23/24 adjusted pre-tax profit is £633m.
((2)) Subject to the blend of profit within the Group's various jurisdictions.
Section 5: FY 2022/23 Financial review
A summary of the reported financial results for the 12 months ended 31 January
2023 is set out below.
Financial summary % Total Change % Total Change % LFL Change
2022/23 2021/22 Reported Constant currency Constant currency
Sales £13,059m £13,183m (0.9)% (0.7)% (2.1)%
Gross profit £4,795m £4,935m (2.8)% (2.6)%
Gross margin % 36.7% 37.4% (70)bps (70)bps
Operating profit £723m £1,144m (36.7)%
Statutory pre-tax profit £611m £1,007m (39.3)%
Statutory post-tax profit £471m £843m (44.1)%
Statutory basic EPS 23.8p 40.3p (40.9)%
Net decrease in cash((1)) £(555)m £(237)m n/a
Total dividend((2)) 12.40p 12.40p -
Adjusted metrics
Retail profit £923m £1,148m (19.7)% (19.2)%
Retail profit margin % 7.1% 8.7% (160)bps (160)bps
Adjusted pre-tax profit £758m £949m (20.2)%
Adjusted pre-tax profit margin %* 5.8% 7.2% (140)bps
Adjusted post-tax profit £589m £737m (20.2)%
Adjusted basic EPS 29.7p 35.2p (15.6)%
Free cash flow £(40)m £385m n/a
Net debt((3)) £(2,274)m £(1,572)m n/a
((1)) Net decrease in cash and cash equivalents and bank overdrafts.
((2)) The Board has proposed a final dividend per share of 8.60p (FY 21/22
final dividend: 8.60p), resulting in a proposed total dividend per share of
12.40p in respect of FY 22/23 (FY 21/22: 12.40p). The final dividend is
subject to the approval of shareholders at the Annual General Meeting on 27
June 2023.
((3)) Net debt includes £2,444m lease liabilities under IFRS 16 in FY 22/23
(FY 21/22: £2,376m).
Total sales decreased by 0.7% on a constant currency basis, to £13,059m,
reflecting resilient sales across both retail and trade channels despite
strong prior year comparatives. Sales were lower in the UK & Ireland and
France, substantially offset by sales growth in Poland, Iberia and Romania. On
a reported basis, which includes the impact of exchange rates, total sales
decreased by 0.9%.
LFL sales decreased by 2.1%, which excludes the sales impact from a net
increase in space of +1.4%, driven by store openings by Screwfix in the UK
& Ireland, and Castorama in Poland. During the year, we opened 101 new
stores (including 77 stores in the UK, 10 in Ireland, seven in France
including five Screwfix stores, and seven in Poland) and closed one store in
the UK and two in Romania.
Gross margin % decreased by 70 basis points on a constant currency basis,
reflecting mix impacts, 'normalised' promotional activity in H1, and one-off
logistics spend in H1 to secure/manage seasonal and 'buffer' stock. Mix
impacts are the result of a lower YoY share (versus other banners) of
B&Q's higher gross margin % revenues given very strong prior year sales,
and unfavourable category mix between lower margin building & joinery and
EPHC (electricals, plumbing, heating & cooling) and higher margin surfaces
& décor categories. On a reported basis, gross margin % also decreased by
70 basis points. Group gross profit decreased by 2.6% in constant currency.
In constant currency, retail profit decreased by 19.2%, largely reflecting
strong prior year comparatives in the UK & Ireland and France, and losses
incurred in 'Other' operations. This was partially offset by retail profit
growth in Poland. On a reported basis, retail profit decreased by 19.7%.
Operating costs increased by 2.4% on a constant currency basis, largely
reflecting higher costs associated with space growth and new store openings,
higher technology spend, and operating cost inflation including increases in
pay rates and significantly higher energy costs. Part of the YoY cost increase
was also the result of the reversal of one-off cost savings that were achieved
in the first half of the prior year due to COVID-related restrictions in our
markets (e.g., advertising, marketing and travel costs). The increase in
operating costs was partially offset through flexing our staff costs and cost
reductions achieved by our strategic cost reduction programme. The Group's
retail profit margin % decreased by 160 basis points to 7.1% (FY 21/22: 8.7%;
FY 19/20: 6.8%).
Adjusted pre-tax profit decreased by 20.2% to £758m (FY 21/22: £949m; FY
19/20: £544m), reflecting lower retail profit, partially offset by lower net
finance costs. Adjusted pre-tax profit margin % decreased by 140 basis points
to 5.8% (FY 21/22: 7.2%; FY 19/20: 4.7%).
Statutory pre-tax profit, which includes adjusting items, decreased by 39.3%
to £611m. This reflects lower operating profit, including the impact of
impairments (see below).
A reconciliation from the adjusted basis to the statutory basis for pre-tax
profit is set out below:
2022/23 2021/22 Increase/ (decrease)
£m £m
Retail profit (constant currency) 923 1,142 (19.2)%
Impact of exchange rates - 6 n/a
Retail profit (reported) 923 1,148 (19.7)%
Central costs (49) (60) n/a
Share of interest and tax of joint ventures & associates (4) (2) n/a
Net finance costs (112) (137) n/a
Adjusted pre-tax profit 758 949 (20.2)%
Adjusting items before tax (147) 58 n/a
Statutory pre-tax profit 611 1,007 (39.3)%
Net finance costs of £112m (FY 21/22: £137m) consist principally of interest
on IFRS 16 lease liabilities. The YoY decrease was due to lower interest on
lease liabilities and higher interest income.
Adjusting items after tax were a total charge of £118m (FY 21/22: gain of
£106m), as detailed below:
2022/23 2021/22
£m £m
Gain/(charge) Gain/(charge)
Net store asset impairment (charges)/reversals (139) 33
Romania goodwill impairment (16) -
Release of Castorama Russia disposal warranty liability 4 -
Release of France and other restructuring provisions 3 9
Property gains 1 3
Commercial operating model restructuring - 4
Release of France uncertain operating tax position - 9
Adjusting items before tax (147) 58
Prior year and other adjusting tax items 29 48
Adjusting items after tax (118) 106
In consideration of the significant increase in discount rates resulting from
high levels of inflation and wider macroeconomic uncertainty, the Group has
undertaken a full impairment review of its stores. The significant increase in
discount rates, combined with revised financial projections, has resulted in
the recognition of £139m of net store asset impairments in the year. These
have been recorded principally in the UK and France.
An impairment charge of £16m has been recorded relating to the remaining
goodwill in Romania, principally driven by the significant increase in
discount rates and revised financial projections.
A £4m liability that was held in relation to warranties as part of the
Castorama Russia disposal in 2020 was released in the year following the
expiry of the warranty claims period.
Other adjusting items include a £3m gain arising due to savings on costs
relating to legacy store closure programmes in France, as compared with the
original restructuring provisions recognised. A gain of £1m was recorded on
the exit of one property in the UK.
Taxation
The Group's adjusted effective tax rate (ETR) is sensitive to the blend of tax
rates and profits in the Group's various jurisdictions. It is higher than the
UK statutory rate because of the amount of Group profit that is earned in
higher tax jurisdictions. The adjusted ETR, calculated on profit before
adjusting items, prior year tax adjustments and the impact of future rate
changes, is 22% (FY 21/22: 22%). The adjusted ETR is consistent with the prior
year rate with small increases relating to the impact of increased losses in
territories in which tax credits are not recognised, and a higher share of
profits in France; offset by reductions for the fall in French corporate
income tax rate.
The statutory effective tax rate includes the impact of adjusting items
(including prior year tax items). The impact of these result in a statutory
effective tax rate of 23%.
Pre-tax profit Pre-tax profit
£m Tax 2022/23 £m Tax 2021/22
£m % £m %
Adjusted effective tax rate 758 (169) 22% 949 (212) 22%
Adjusting items (147) 29 58 48
Statutory effective tax rate 611 (140) 23% 1,007 (164) 16%
On 8 June 2022, the General Court of the European Union dismissed several of
the appeals, including the UK Government's, to annul the European Commission's
2019 state aid decision concerning the UK's controlled foreign company tax
rules. This decision has been appealed to the European Court of Justice.
In FY 21/22, Kingfisher paid £64m (including interest) to HM Revenue &
Customs in relation to the state aid decision. The Group continues to
recognise this amount as a non-current tax asset based on its assessment that
its appeal will ultimately be successful. Refer to note 13 of the condensed
financial statements.
In February 2022, a payment of €40m (c.£34m) was made to the French tax
authorities relating to a historic tax liability. This amount was fully
provided for in prior periods.
The statutory tax rates applicable to this financial year and the expected
statutory tax rates for next year in our main jurisdictions are as follows:
Statutory tax rate Statutory tax rate
2023/24 2022/23
UK 24% 19%
France 26% 26%
Poland 19% 19%
Adjusted basic earnings per share decreased by 15.6% to 29.7p (FY 21/22:
35.2p), which excludes the impact of adjusting items. Basic earnings per share
decreased by 40.9% to 23.8p (FY 21/22: 40.3p) as set out below:
2022/23 2021/22
Earnings((1)) EPS Earnings((1)) EPS
£m pence £m pence
Adjusted basic earnings per share 589 29.7 737 35.2
Adjusting items before tax (147) (7.4) 58 2.8
Prior year and other adjusting tax items 29 1.5 48 2.3
Basic earnings per share 471 23.8 843 40.3
((1)) Earnings figures presented reconcile adjusted post-tax profits to
statutory post-tax profits.
Dividends
The Board has proposed a final dividend per share of 8.60p (FY 21/22 final
dividend: 8.60p). Taken alongside the interim dividend already paid of 3.80p
(FY 21/22 interim dividend: 3.80p), this results in a proposed total dividend
per share of 12.40p in respect of FY 22/23 (FY 21/22: 12.40p). The final
dividend is subject to shareholder approval at the Annual General Meeting on
27 June 2023, and if approved will be paid on 3 July 2023 to shareholders on
the register at close of business on 26 May 2023. The shares will go
ex-dividend on 25 May 2023.
A dividend reinvestment plan (DRIP) is available to shareholders who would
prefer to reinvest their dividends in the Company's shares. The last date for
receipt of DRIP elections is 12 June 2023.
For further details on our dividend policy please refer to 'Medium-term
financial and capital allocation priorities', within Section 2.
Management of balance sheet and liquidity risk and financing
Management of cash and debt facilities
Kingfisher regularly reviews the level of cash and debt facilities required to
fund its activities. This involves preparing a prudent cash flow forecast for
the medium term, determining the level of debt facilities required to fund the
business, planning for repayment of debt at its maturity, and identifying an
appropriate amount of headroom to provide a reserve against unexpected
outflows and/or unexpected impacts to cash inflows. To retain financial
flexibility, we aim to maintain strong liquidity headroom (including cash and
cash equivalents, and committed debt facilities), which is currently set at a
minimum of £800m.
Net debt to EBITDA
As of 31 January 2023, the Group had £2.3bn (FY 21/22: £1.6bn) of net debt
on its balance sheet including £2.4bn (FY 21/22: £2.4bn) of total lease
liabilities.
The ratio of the Group's net debt to EBITDA was 1.6 times as of 31 January
2023 (1.0 times as of 31 January 2022). At this level, the Group has financial
flexibility whilst retaining an efficient cost of capital.
The Group's maximum net debt to EBITDA is 2.0 times over the medium term. For
further details please refer to 'Medium-term financial and capital allocation
priorities', within Section 2.
Net debt to EBITDA is set out below:
2022/23 2021/22
£m £m
Retail profit 923 1,148
Central costs (49) (60)
Depreciation and amortisation 582 555
EBITDA 1,456 1,643
Net debt 2,274 1,572
Net debt to EBITDA 1.6 1.0
Credit ratings
Kingfisher holds a BBB credit rating with Fitch, (P) Baa2 rating with Moody's,
and a BBB rating with Standard and Poor's. The Outlook is Stable across all
three agencies.
Revolving credit facility
The Group has a £550m revolving credit facility (RCF) agreement in place with
a group of its relationship banks, linked to sustainability and
community-based targets, which expires in May 2025. As of 31 January 2023,
this RCF was undrawn.
Term loans
In FY 21/22, the Group repaid its €50m and £50m fixed term loans at
maturity in September 2021 and December 2021 respectively. During FY 22/23,
the Group entered into two new fixed term loans: £50m maturing in December
2024 and £50m maturing in January 2025, with the latter linked to the Group's
sustainability and community-based targets.
Covenants
The terms of the committed RCF and both term loans require that the ratio of
Group operating profit (excluding adjusting items) to net interest payable
(excluding interest on IFRS 16 lease liabilities) must be no less than 3:1 for
the preceding 12 months as at the half and full year-ends. As of 31 January
2023, Kingfisher was in compliance with this requirement.
Total liquidity
As of 31 January 2023, the Group had access to over £800m in total liquidity,
including cash and cash equivalents of £270m and access to a £550m RCF.
Further detail on Kingfisher's debt and facilities can be found at
www.kingfisher.com (http://www.kingfisher.com/index.asp?pageid=74) .
Free cash flow
A reconciliation of free cash flow is set out below:
2022/23 2021/22
£m £m
Operating profit 723 1,144
Adjusting items 147 (58)
Operating profit (before adjusting items) 870 1,086
Other non-cash items((1)) 612 595
Change in working capital (469) (215)
Pensions and provisions (20) (31)
Net rent paid (454) (480)
Operating cash flow 539 955
Net interest paid - (4)
Tax paid (130) (169)
Gross capital expenditure (449) (397)
Free cash flow (40) 385
Ordinary dividends paid (246) (254)
Share buybacks (337) (157)
Share purchase for employee incentive schemes (9) (29)
Disposal of Castorama Russia 8 7
French tax authority payment((2)) (34) -
Other tax authority payment((3)) - (64)
Disposal of assets and other((4)) 4 (28)
Net cash flow* (654) (140)
Opening net debt (1,572) (1,394)
Movements in lease liabilities (41) 7
Other movement including foreign exchange (7) (45)
Closing net debt (2,274) (1,572)
((1)) Includes principally depreciation and amortisation, share-based
compensation charge and pension operating cost.
((2)) Payments made in relation to French tax authority settlement (refer to
the Taxation section above for further details).
((3)) Payments made in relation to the EC state aid challenge (refer to the
Taxation section above for further details).
((4)) Includes proceeds from the issue of new shares, dividends from joint
ventures and associates, and disposal of assets; partially offset by adjusting
cash flow items (principally comprising restructuring costs).
Operating profit (before adjusting items) was £216m lower than last year,
largely reflecting lower profits in the UK & Ireland and France.
The working capital outflow of £469m was partly driven by an increase in net
inventory of £234m. Over 100% of this increase was driven by higher product
purchase prices, alongside increases related to higher levels of 'carry-over'
seasonal items (which we decided to proactively purchase ahead of forecast
cost price increases), and stock to support our store expansion programme. The
increase was partially offset by lower purchases and our strategic actions to
reduce inventory. Payables decreased by £191m, largely reflecting higher
inventory purchases in the prior year to rebuild product availability, build
seasonal and 'buffer' stock, and secure lower cost stock. Receivables
increased by £44m.
Gross capital expenditure in the year was £449m, increasing by 13% (FY 21/22:
£397m). Of this expenditure, 33% was invested in refreshing, maintaining and
adapting existing stores (including renewable energy initiatives), 13% on new
stores, 39% on technology and digital development, 5% on range reviews and 10%
on other areas including supply chain investment.
Overall, free cash flow for the year was £(40)m (FY 21/22: £385m).
Net debt (including IFRS 16 lease liabilities) as of 31 January 2023 was
£2,274m (FY 21/22: £1,572m).
A reconciliation of free cash flow and net cash flow to the statutory net
movement in cash and cash equivalents and bank overdrafts is set out below:
2022/23 2021/22
£m £m
Free cash flow (40) 385
Ordinary dividends paid (246) (254)
Share buybacks (337) (157)
Share purchase for employee incentive schemes (9) (29)
Disposal of Castorama Russia 8 7
French tax authority payment((1)) (34) -
Other tax authority payment((2)) - (64)
Disposal of assets and other((3)) 4 (28)
Net cash flow (654) (140)
Issue of fixed term debt 99 -
Repayment of bank loans - (2)
Repayment of fixed term debt - (95)
Net decrease in cash and cash equivalents (555) (237)
and bank overdrafts
((1)) Payments made in relation to French tax authority settlement (refer to
the Taxation section above for further details).
((2)) Payments made in relation to the EC state aid challenge (refer to the
Taxation section above for further details).
((3)) Includes proceeds from the issue of new shares, dividends from joint
ventures and associates, and disposal of assets; partially offset by adjusting
cash flow items (principally comprising restructuring costs).
Return on capital employed
(ROCE*)
In FY 22/23, Kingfisher's post-tax ROCE was 10.9% (FY 21/22: 14.6%). The
decrease was mainly driven by lower profit in the UK & Ireland.
Kingfisher's weighted average cost of capital (WACC) is 9.3% (FY 21/22: 7.6%).
ROCE by geographic division is analysed below:
Proportion of Group sales Capital employed (CE) £bn Proportion of Group CE
Sales ROCE ROCE
£bn 2022/23 2021/22
UK & Ireland 6.2 47.5% 3.0 47.8% 16.4% 22.6%
France 4.5 34.1% 1.7 27.3% 8.5% 9.7%
Other International 2.4 18.4% 1.3 20.8% 9.1% 9.3%
Central 0.2 4.1%
Total 13.1 6.2 10.9% 14.6%
Property
Kingfisher owns a significant property portfolio, almost all of which is used
for trading purposes. A formal valuation of the portfolio was undertaken by
external professional valuers in October 2022, with the valuations then
updated to 31 January 2023. Based on this exercise, on a sale and leaseback
basis with Kingfisher in occupancy, the value of the property portfolio is
£2.8bn as of 31 January 2023 (FY 21/22: £2.8bn).
2022/23 2022/23 Yields 2021/22 2021/22 Yields
£bn £bn
France 1.4 8.1% 1.3 8.0%
UK 0.5 7.2% 0.6 6.2%
Poland 0.7 8.0% 0.7 7.6%
Other 0.2 n/a 0.2 n/a
Total 2.8 2.8
This is compared to the net book value of £2.2bn (FY 21/22: £2.2bn) recorded
in the financial statements (including investment property and property
included within assets held for sale). Balance sheet values were frozen at 1
February 2004 on the transition to IFRS.
Pensions
As of 31 January 2023, the Group had a net surplus of £137m (FY 21/22: £410m
net surplus) in relation to defined benefit pension arrangements, of which a
£251m surplus (FY 21/22: £540m surplus) was in relation to the UK scheme.
The decrease in net surplus is mainly due to significant increases in yields
on UK government and corporate bonds which has caused reductions of around a
third in both scheme liabilities and assets; the latter reflecting the
liability-matching investment strategy. Further actuarial losses arose due to
updated membership data and demographic assumptions following the triennial
funding valuation completed in the year. As part of the funding valuation
exercise, the Trustee and Kingfisher have agreed to cease annual employer
contributions during the period from August 2022 to July 2025. The accounting
valuation is sensitive to a number of assumptions and market rates which are
likely to fluctuate in the future. Refer to note 10 of the condensed financial
statements.
Section 6: Glossary
Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors have adopted various
Alternative Performance Measures (APMs), also known as non-GAAP measures, of
historical or future financial performance, position or cash flows other than
those defined or specified under International Financial Reporting Standards
(IFRS). These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those used by other
retailers. APMs should be considered in addition to, and are not intended to
be a substitute for, or superior to, IFRS measurements.
APM Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose
Adjusted basic earnings per share (EPS) Basic earnings per share A reconciliation of adjusted basic earnings per share is included in the Adjusted basic earnings per share represents profit after tax attributable to
Financial Review (Section 5) and note 8 of the condensed financial statements the owners of the parent, before the impact of adjusting items (see definition
below), divided by the weighted average number of shares in issue during the
period. The exclusion of adjusting items helps provide an indication of the
Group's ongoing business performance.
Adjusted effective tax rate Effective tax rate A reconciliation to the statutory effective tax rate is set out in the The adjusted effective tax rate is calculated as continuing income tax expense
Financial Review (Section 5) excluding tax adjustments in respect of prior years (including the impact of
changes in tax rates on deferred tax), significant one-off tax settlements and
provision charges/releases and the tax effects of adjusting items, divided by
continuing profit before taxation excluding adjusting items. Prior year tax
items represent income statement tax relating to underlying items originally
arising in prior years, including the impact of changes in tax rates on
deferred tax. The exclusion of items relating to prior years, and those not in
the ordinary course of business, helps provide a better indication of the
Group's ongoing rate of tax.
Adjusted pre-tax profit Profit before taxation A reconciliation of adjusted pre-tax profit is set out in the Financial Review Adjusted pre-tax profit is used to report the performance of the business at a
(Section 5) Group level. This is stated before adjusting items. The exclusion of adjusting
items helps provide an indication of the Group's ongoing business performance.
Adjusted pre-tax profit margin % No direct equivalent Refer to definition Adjusted pre-tax profit is used to report the performance of the business at a
Group level and is separately defined. Adjusted pre-tax profit margin %
represents adjusted pre-tax profit as a percentage of sales. It is a measure
of overall business profitability.
Adjusted post-tax profit Profit after tax A reconciliation of adjusted post-tax profit is set out in the Financial Adjusted post-tax profit is used to report the after-tax performance of the
Review (Section 5) and note 8 of the condensed financial statements business at a Group level. This is stated before adjusting items. The
exclusion of adjusting items helps provide an indication of the Group's
ongoing after-tax business performance.
Adjusting items No direct equivalent Not applicable Adjusting items, which are presented separately within their relevant income
statement category, include items which by virtue of their size and/or nature,
do not reflect the Group's ongoing trading performance. Adjusting items may
include, but are not limited to: non-trading items included in operating
profit such as profits and losses on the disposal, closure, exit or impairment
of subsidiaries, joint ventures, associates and investments which do not form
part of the Group's ongoing trading activities; the costs of significant
restructuring and incremental acquisition integration costs; profits and
losses on the exit of properties, impairments of goodwill and significant
impairments (or impairment reversals) of other non-current assets; prior year
tax items (including the impact of changes in tax rates on deferred tax),
significant one-off tax settlements and provision charges/releases and the tax
effects of other adjusting items; financing fair value remeasurements i.e.,
changes in the fair value of financing derivatives, excluding interest
accruals, offset by fair value adjustments to the carrying amount of
borrowings and other hedged items under fair value (or non-designated) hedge
relationships. Financing derivatives are those that relate to hedged items of
a financing nature.
Central costs No direct equivalent Not applicable Central costs principally comprise the costs of the Group's head office before
adjusting items. This helps provide an indication of the Group's ongoing head
office costs.
Constant currency No direct equivalent Not applicable Constant currency changes in total sales, LFL sales, gross profit, gross
margin %, retail profit, retail profit margin % and operating costs reflect
the year-on-year movements after translating the prior year comparatives at
the current year's average exchange rates. These are presented to eliminate
the effects of exchange rate fluctuations on the reported results.
Dividend cover No direct equivalent Not applicable Dividend cover represents the ratio of earnings to dividends. It is calculated
as adjusted basic earnings per share divided by the total (full year) dividend
per share. It is used as an indication of how sustainable dividend payments
are.
Digitally-enabled sales(±) No direct equivalent Refer to definition Digitally-enabled sales are e-commerce sales plus sales associated with
customer orders placed in stores or via contact centres for collection from
store or home delivery (via central home delivery or via store-to-home). It is
used to help track how well we are responding to changing customer behaviours.
E-commerce sales penetration %(±) No direct equivalent Refer to definition E-commerce sales penetration % represent total e-commerce sales as a
percentage of sales. For the purpose of this calculation only, sales are
adjusted to replace marketplace net sales with marketplace gross sales. It is
used to track the success of our e-commerce strategy.
First-party e-commerce sales(±) No direct equivalent Refer to definition First-party e-commerce sales are total first-party sales (excluding VAT)
derived from online transactions, including click & collect (C&C).
This includes sales transacted on any device, however not sales through a call
centre. Sales (and related commissions/fees) from products supplied by
third-party e-commerce marketplace vendors are excluded. It is used to measure
the performance of our first-party e-commerce business across the Group.
Total e-commerce sales(±) No direct equivalent Refer to definition Total e-commerce sales are first-party e-commerce sales plus marketplace gross
sales. References to digital or e-commerce sales growth relates to growth in
constant currency. It is used to measure the performance of all e-commerce
business (first-party and third-party) across the Group.
EBITDA Profit before taxation A reconciliation of EBITDA is set out in the Financial Review (Section 5) EBITDA (earnings before interest, tax, depreciation and amortisation) is
calculated as retail profit less central costs and before depreciation and
amortisation. This measure is widely used in calculating the ratio of net debt
to EBITDA, and is used to reflect the Group's leverage.
Free cash flow Net increase in cash and cash equivalents and bank overdrafts A reconciliation of free cash flow is set out in the Financial Review (Section Free cash flow represents the cash generated from operations (excluding
5) adjusting items) less the amount spent on interest, tax and capital
expenditure during the year (excluding asset disposals). This provides a
measure of how much cash the business generates that can be used for
expansion, capital returns and other purposes.
Gross margin % No direct equivalent Refer to definition Gross profit represents sales from the supply of home improvement products and
services (excluding VAT), less the associated cost of those sales. Gross
margin % represents gross profit as a percentage of sales. It is a measure of
operating performance.
LFL Sales Refer to definition LFL (like-for-like) sales growth represents the constant currency, YoY sales
growth for stores that have been open for more than one year. Stores
temporarily closed or otherwise impacted due to COVID are also included. It is
a measure to reflect the Group's performance on a comparable basis.
3-year LFL Sales Refer to definition 3-year LFL is calculated by compounding the current and prior two periods' LFL
growth. For example, FY 22/23 LFL growth of 5%, FY 21/22 LFL growth of 4%, and
FY 20/21 LFL growth of 3%, results in 3-year LFL growth of 12.5%. Russia (sale
completed on 30 September 2020) is excluded from Group and Other International
3-year LFL calculations. It is a measure of the Group's performance on a
comparable basis. In FY 23/24, 3-year LFL measures will no longer be reported.
Marketplace gross merchandise value (GMV)(±) No direct equivalent Refer to definition Marketplace GMV is the total transaction value (including VAT) from the sale
of products supplied by third-party e-commerce marketplace vendors. It is used
to measure the performance of our e-commerce marketplace, and is the basis on
which our commissions from third-party vendors are determined.
Marketplace gross sales(±) No direct equivalent Refer to definition Marketplace gross sales is the transaction value (excluding VAT) from the sale
of products supplied by third-party e-commerce marketplace vendors. Returned
and cancelled orders are excluded. It is used to measure the performance of
our e-commerce marketplace.
Marketplace net sales(±) No direct equivalent Refer to definition Marketplace net sales are commissions (excluding VAT) earned on e-commerce
marketplace transactions, together with other service fees. This is included
within sales. Commissions are determined based on GMV. It is used to measure
the performance of our e-commerce marketplace.
Marketplace participation %(±) No direct equivalent Refer to definition Marketplace participation % represent B&Q's marketplace gross sales as a
percentage of B&Q's total e-commerce sales. It is used to track the
success of our marketplace strategy and performance.
Net debt No direct equivalent A reconciliation of this measure is provided in note 12 of the condensed Net debt comprises lease liabilities, borrowings and financing derivatives
financial statements (excluding accrued interest), less cash and cash equivalents and short term
deposits, including such balances classified as held for sale.
Net cash flow Net increase in cash and cash equivalents and bank overdrafts A reconciliation of net cash flow is set out in the Financial Review (Section Net cash flow is a measure to reflect the total movement in the net debt
5) and in note 12 of the condensed financial statements balance during the year excluding the movement in lease liabilities, exchange
differences and other non-cash movements.
Operating costs No direct equivalent Not applicable Operating costs represent gross profit less retail profit. This is the Group's
operating cost measure used to report the performance of our retail
businesses.
Own exclusive brands (OEB) sales(±) No direct equivalent Refer to definition OEB refers to our portfolio of own exclusive brands across seven core
categories - surfaces & décor, tools & hardware, bathroom &
storage, kitchen, EPHC (electricals, plumbing, heating & cooling),
building & joinery, and outdoor.
OEB sales are sales of own exclusive brand products. It is used to measure the
performance of OEB across the Group.
Retail profit Profit before taxation A reconciliation of Group retail profit to profit before taxation is set out Retail profit is stated before central costs, adjusting items and the Group's
in the Financial Review (Section 5) and note 3 of the condensed financial share of interest and tax of JVs and associates. This is the Group's operating
statements. There is no statutory equivalent to retail profit at a retail profit measure used to report the performance of our retail businesses.
banner level
Retail profit margin % No direct equivalent Refer to definition Retail profit is the Group's operating profit measure used to report the
performance of our retail businesses and is separately defined above. Retail
profit margin % represents retail profit as a percentage of sales. It is a
measure of operating performance.
ROCE No direct equivalent Refer to definition ROCE (return on capital employed) is the post-tax retail profit less central
costs, excluding adjusting items, divided by capital employed excluding
historic goodwill, net debt and adjusting restructuring provision. The measure
provides an indication of the ongoing returns from the capital invested in the
business. Capital employed is calculated as a two-point average. The
calculation excludes disposed businesses.
Same-store net inventory Inventory Refer to definition Same-store net inventory movement represents the constant currency, YoY change
in net inventory before the impact of store openings and closures. Stores
temporarily closed or otherwise impacted due to COVID are also included. It is
a measure to reflect the Group's inventory management on a comparable basis.
(±) Indicates the inclusion of new APMs during FY 22/23. The new APMs in the
table above have been introduced to track the performance of our own exclusive
brands (OEB) and our e-commerce businesses and digital products and services.
Other Definitions
Banque de France data for DIY retail sales (non-seasonally adjusted). Includes
relocated and extended stores.
https://webstat.banque-france.fr/fr/#/node/5384398
(https://webstat.banque-france.fr/fr/#/node/5384398) . As of and including
January 2023, we have taken the decision to no longer communicate Castorama
France and Brico Dépôt France monthly sales figures to Banque de France and
the internal index of FMB (Fédération des Magasins de Bricolage - our trade
association), until further notice.
'Do It Yourself' (DIY) sales include products that facilitate self-undertaken
home improvement projects and tasks, including paint, lighting, tools and
hardware, and garden maintenance.
'Do It For Me' (DIFM) sales include products and services used in home
improvement projects and tasks that predominantly require a tradesperson to
undertake, including kitchens, bathrooms, tiling, wardrobes, windows and
doors, certain electrical and plumbing activities, and installation services.
France consists of Castorama France and Brico Dépôt France.
GNFR (Goods Not For Resale) covers the procurement of all goods and services a
retailer consumes (including ocean freight, energy, media buying, cleaning,
and security).
Iberia consists of Brico Dépôt Spain and Brico Dépôt Portugal.
Other International consists of Poland, Iberia, Romania, 'Other', and Turkey
(Koçtaş JV). 'Other' consists of the consolidated results of Screwfix
International, NeedHelp, and results from franchise agreements.
SKU (Stock Keeping Unit) is defined as the number of individual variants of
products sold or remaining in stock. It is a distinct type of item for sale,
such as a product and all attributes associated with the item type that
distinguish it from others. These attributes could include, but are not
limited to, manufacturer, description, material, size, colour, packaging and
warranty terms.
UK & Ireland consists of B&Q in the UK & Ireland and Screwfix in
the UK & Ireland.
Section 7: Forward-looking statements
You are not to construe the content of this announcement as investment, legal
or tax advice and you should make your own evaluation of the Company and the
market. If you are in any doubt about the contents of this announcement or the
action you should take, you should consult a person authorised under the
Financial Services and Markets Act 2000 (as amended) (or if you are a person
outside the UK, otherwise duly qualified in your jurisdiction).
This announcement has been prepared in relation to the financial results for
the 12 months ended 31 January 2023. The financial information referenced in
this announcement is not audited and does not contain sufficient detail to
allow a full understanding of the results of the Group. Nothing in this
announcement should be construed as either an offer or invitation to sell or
any offering of securities or any invitation or inducement to any person to
underwrite, subscribe for or otherwise acquire securities in any company
within the Group or an invitation or inducement to engage in investment
activity under section 21 of the Financial Services and Markets Act 2000 (as
amended) (or, otherwise under any other law, regulation or exchange rules in
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Certain information contained in this announcement may constitute
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and those of our Officers, Directors and employees concerning, amongst other
things, the Company's results of operations, financial condition, changes in
global or regional trade conditions (including a downturn in the retail or
financial services industries), competitive influences, changes in tax rates,
exchange rates or interest rates, changes to customer preferences, the state
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of which are beyond our control, dependent on actions of third parties, or
currently unknown to us - as well as potentially inaccurate assumptions that
could cause actual events or results or actual performance of the Group to
differ materially from those reflected or contemplated in such forward-looking
statements. For further information regarding risks to Kingfisher's business,
please consult the risk management section of the Company's Annual Report (as
published). No representation, warranty or other assurance is made as to the
achievement or reasonableness of, and no reliance should be placed on, such
forward-looking statements.
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