REG - Kingfisher PLC - Final Results (Part 1 of 2)
25/03/2024 07:00
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RNS Number : 0565I Kingfisher PLC 25 March 2024
Final results for the year ended 31 January 2024
Financial summary % Total Change % Total Change % LFL* Change
2023/24 2022/23 Reported Constant currency* Constant currency
Sales £12,980m £13,059m (0.6)% (1.8)% (3.1)%
Gross profit £4,776m £4,795m (0.4)% (1.6)%
Gross margin %* 36.8% 36.7% 10bps 10bps
Operating profit £580m £723m (20.0)%
Statutory pre-tax profit (PBT) £475m £611m (22.3)%
Statutory post-tax profit £345m £471m (26.7)%
Statutory basic EPS 18.2p 23.8p (23.5)%
Net increase/(decrease) in cash(±) £84m £(555)m n/a
Total dividend((1)) 12.40p 12.40p -
Adjusted metrics
Retail profit* £749m £923m (18.9)% (19.5)%
Retail profit margin %* 5.8% 7.1% (130)bps (130)bps
Adjusted pre-tax profit (PBT)* £568m £758m (25.1)%
Adjusted post-tax profit* £415m £589m (29.2)%
Adjusted basic EPS* 21.9p 29.7p (26.4)%
Free cash flow* £514m £(40)m n/a
Net debt*((2)) £(2,116)m £(2,274)m n/a
* See page 6 for further details on non-GAAP measures and other terms; (±)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts
FY 23/24 highlights
· Total sales -1.8% and LFL -3.1%. Q4 LFL -4.3%
· Positive UK & Ireland sales, alongside consistent market
share gains. France and Poland sales impacted by more challenging consumer
backdrop
· Sequential quarterly improvement in volume trend in 'core'
categories as retail price inflation tapers
· E-commerce sales penetration up to 17.4% (FY 22/23: 16.3%),
supported by strong marketplace sales growth at B&Q
· Adjusted PBT and free cash flow delivered in line with guidance.
Statutory PBT down 22.3% to £475m
· Commenced new £300m share buyback programme (c.£50m completed
to date). Proposed total dividend for FY 23/24 maintained at 12.40p per share,
in line with FY 22/23
Key strategic priorities will drive market share and our medium-term financial
priorities
· Grow by building on our different banners:
- Screwfix UK & Ireland: up to 40 new stores planned in FY
24/25; medium-term target of >1,000
- Screwfix France: up to 15 new stores planned in FY 24/25;
potential for >600 stores over time
- Castorama Poland: targeting up to 75 medium-box and compact store
openings over next 5 years
- Net space growth to drive an uplift in sales of c.+1.5% to +2.5%
per annum over medium term
· Accelerate e-commerce through speed and choice: launching new
e-commerce marketplaces in France and Poland, following strong results at
B&Q. Ambition for e-commerce to reach 30% sales penetration, one third of
which represents high margin marketplace gross sales
· Build a data-led customer experience: embedding data and
AI-powered solutions and retail media across the Group to drive incremental
revenue, profit and cash. Ambition for retail media revenues to reach up to 3%
of the Group's total e-commerce sales
· Develop our trade business: continued success in the UK &
Ireland; strong results from trade proposition tests in France and Poland -
accelerating roll-out in FY 24/25. Aiming for >£1bn sales at TradePoint UK
& Ireland, and to double trade penetration in France and Poland over
medium term
A clear plan to take France to the next level
· Initiating a new plan to simplify French organisation and
significantly improve performance and profitability of Castorama
· Medium-term retail profit margin target for France of c.5% to 7%
FY 24/25 outlook and guidance (see Section 1 for further details)
· Current trading: Q1 24/25 LFL sales (to date)((3)) -2.3%
- Improved sales trend in the UK & Ireland, France and Poland,
compared to Q4 23/24
- Improved volume trend in all three categories: core, 'big-ticket'
and seasonal
· Outlook for FY 24/25:
- Expect repairs, maintenance and renovation on existing homes to
provide resilience, but cautious on overall market outlook given lag between
housing demand & home improvement demand
- Continued effective management of product costs and retail prices
- Expect c.£120m of additional cost reductions and productivity
gains to partially offset higher pay rates and technology investments
- Expect FY 24/25 adjusted PBT of c.£490m to £550m((4)) and free
cash flow of c.£350m to £410m
· Strongly positioned for growth in 2025 and beyond - more agile,
significant cost taken out across the Group, and confidence in multiple
profitable growth drivers over the medium term. Targeting free cash flow of
c.£450m in FY 25/26, followed by >£500m per annum from FY 26/27
Thierry Garnier, Chief Executive Officer, said:
"Despite all the macroeconomic and consumer challenges in our markets over the
past year, we have stayed focused on our customers and our long-term strategy.
I am immensely proud of all our teams for their efforts. In the UK &
Ireland, B&Q, TradePoint and Screwfix each delivered resilient sales and
market share growth - in particular very strong gains at Screwfix. In France,
where the market has been impacted by low consumer confidence, we have made
significant adjustments to the cost base and started to embed e-commerce
marketplace and trade customer initiatives similar to those successfully
implemented in the UK. And in Poland, where we faced strong comparatives and a
tough economic backdrop, sales trends are gradually improving in line with the
consumer environment.
"We continue to execute against our strategic priorities at pace, with high
conviction in our multiple growth opportunities. The success of our
marketplaces in the UK and Iberia is well ahead of our expectations, with
launches also planned in France and Poland this year. We have continued the
international expansion of Screwfix, with 22 stores now open in France and
encouraging results so far. Our trade proposition trials in France and Poland,
as well as our data, AI and retail media initiatives, are also delivering
positive results - encouraging us to accelerate their roll-out. We are also
today outlining a new plan to simplify the French organisation and
significantly improve the performance and profitability of Castorama France,
which includes restructuring and modernising the store network.
"Looking forward, we remain confident in the attractive growth prospects of
the home improvement industry and our ability to grow ahead of our markets. In
the short term, while repairs, maintenance and renovation activity on existing
homes continue to support resilient demand, we are cautious on the overall
market outlook for 2024 due to the lag between housing demand and home
improvement demand. Against this backdrop we will remain agile and focused on
what is within our control - leveraging our strategy to deliver market share
growth, driving productivity gains, and managing our costs and cash
effectively.
"In line with this view, we reaffirm our medium-term financial priorities,
focused on growth, cash generation and attractive returns to shareholders."
FY 23/24 results summary
· Sales -1.8% (in constant currency) and LFL sales -3.1%
- Q4 LFL sales -4.3%, broadly in line with Q3 LFL -3.9%
· Sales by region:
- UK & Ireland* LFL +0.8%: Positive performance, supported by
resilient e-commerce and trade customer sales. Market share gains at B&Q,
TradePoint and Screwfix
- France* LFL -5.9%: Weak market driven by low consumer confidence.
Castorama performing in line with market; weaker at Brico Dépôt but improved
trend in Q4
- Poland LFL -9.5%: Performance impacted by weak trading
environment, against very strong comparatives; improving sales trend since Q2.
Gained market share YoY in Q4; full year share remains up versus FY 21/22
· Sales by category:
- Core and 'big-ticket' sales*: LFL -2.4%, 82% of sales. Sequential
quarterly improvement in volume trend in 'core' categories (77% of total sales
volume)
- Seasonal sales*: LFL -5.9%, 18% of sales. Sales affected by
unseasonal weather during the year
· Gross margin % +10 basis points to 36.8% (FY 22/23: 36.7%)
reflecting effective management of inflation and supplier negotiations,
partially offset by higher customer participation in promotional activity in
France and Poland
· Retail profit -19.5% in constant currency to £749m (FY 22/23:
£923m), reflecting lower gross profits in France and Poland, and higher
operating costs* in the UK & Ireland and Poland largely due to higher pay
rates and energy costs, as expected
· Statutory PBT -22.3% to £475m (FY 22/23: £611m), reflecting
lower operating profit, including the impact of £76m of net store impairments
reflecting revised future projections
· Adjusted PBT -25.1% to £568m (FY 22/23: £758m), reflecting
lower retail profit and higher central costs* and share of JV interest and
tax, partially offset by lower net finance costs
· Free cash flow of £514m, up £554m (FY 22/23: £(40)m),
reflecting the unwind of working capital outflows from the prior year, and
lower capital expenditure
· Net increase in cash of £84m (FY 22/23: net decrease in cash
£555m), reflecting higher free cash flow, partially offset by £397m returned
to shareholders via ordinary dividends and share buybacks
· Net debt down to £2,116m (31 January 2023: £2,274m), including
£2,367m of lease liabilities under IFRS 16, reflecting the net increase in
cash. Net debt to EBITDA* of 1.6x (31 January 2023: 1.6x)
· Total dividend per share proposed of 12.40p (FY 22/23: 12.40p)
Reaffirming our medium-term financial and capital allocation priorities
Kingfisher operates in attractive markets, with positive longer-term
structural trends underpinning the medium to longer-term growth outlook
(including more working from home and the focus on energy efficiency), giving
us confidence in further market growth potential.
Kingfisher is a more agile and lean organisation that is strongly positioned
to deliver profitable growth through self-help and operating leverage.
Building on our industry's attractive growth prospects, and supported by the
application of Kingfisher's strategic priorities, the Group's medium-term
financial and capital allocation priorities are as follows:
Financial priorities:
· 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 structural cost reduction opportunities
· Strong cash generation to drive growth investment and shareholder
returns:
- Free cash flow of c.£450m in FY 25/26, followed by >£500m per
annum from FY 26/27, supported by profit growth and ongoing inventory
self-help measures
Capital allocation priorities:
· Organic and 'bolt-on' inorganic growth opportunities that
accelerate our strategy. Target gross capex of c.3% of total sales per annum,
focused 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 the medium term
· Building on our strong track record of shareholder returns - over
£1.6bn of dividends and share repurchases from FY 19/20:
- A progressive and sustainable ordinary dividend policy, with
target dividend cover* of 2.25-2.75x
- Any surplus capital to be returned via share buybacks or special
dividends
Strategy highlights - delivering against our strategic priorities at pace
For a detailed update on the progress we are making against our strategic
plan, 'Powered by Kingfisher', please refer to Section 4 of this release. The
highlights are as follows:
1) Grow by building on our different banners:
- B&Q's trade-focused banner, TradePoint, opened 21 new trade
counters, extending its presence within the B&Q store network to 209 (67%
of stores)
- Screwfix opened 51 stores in the UK & Ireland for an overall
total of 922 stores; up to 40 new stores planned in FY 24/25
- Screwfix also opened 15 stores in France for an overall total of
20 stores, with positive customer feedback and momentum. Up to 15 new stores
planned in FY 24/25, with two stores opened post year-end
- Launched Screwfix as a pure-play online retailer in six European
countries (Poland, Spain, Belgium, the Netherlands, Sweden and Austria)
- Five new Castorama stores opened in Poland for an overall total of
102 stores. Targeting up to 75 new medium-box and compact store openings over
the next five years
2) Accelerate e-commerce through speed and choice:
- Total e-commerce sales* of £2.3bn, an increase of 6.4% YoY
supported by strong marketplace sales growth at B&Q
- E-commerce sales penetration* of 17.4% (FY 22/23: 16.3%). Ambition
to reach 30% sales penetration
- Optimised click & collect (C&C) picking routines driving a
significant decrease in pick times; 93% of first-party e-commerce orders
picked in-store (FY 22/23: 91%)
- Growing adoption of last-mile fulfilment options, including
increased use of Screwfix Sprint (one-hour home delivery), C&C lockers in
Poland, and a new Screwfix partnership with Deliveroo
- Continued strong growth of e-commerce marketplace proposition at
B&Q and Brico Dépôt Iberia*. B&Q marketplace gross sales* of £154m
for the year, reaching 38% marketplace participation* in January 2024.
Launching similar, tailored e-commerce marketplaces in France and Poland
- Signed strategic partnerships with Octopia, Channel Advisor,
ShoppingFeed, BeezUp, Linnworks and Just Applications. Provides access to
thousands of additional marketplace merchants globally, supporting our
marketplace roll-outs in France and Poland
3) Build a data-led customer experience:
- Implemented AI-powered product recommendation and personalisation
engines in the UK, France and Romania; B&Q now generates c.10% of its
e-commerce sales from product recommendations
- Deployed data and AI-driven tools to optimise promotions,
markdowns and clearance; roll-out at B&Q since Q2 delivering gross margin
improvement. Further banner roll-outs planned in FY 24/25
- Developed and implemented end-to-end supply chain visibility tool
to support lower inventory levels and faster replenishment cycles, now live in
all markets. Sharing inventory data with suppliers resulting in substantial
reductions in average lead-times and minimum order quantities
- Accelerating retail media (advertising) proposition; now live at
B&Q, Castorama France and Brico Dépôt France. Signed Group partnerships
with CitrusAd for technology and Unlimitail, the new retail media joint
venture between Carrefour and Publicis, for sales support
4) Differentiate and win through own exclusive brands (OEB):
- OEB products continuing to drive affordability, product innovation
and reduced environmental impact, and carrying a higher gross margin % on
average than branded products
- Total OEB sales* of £5.7bn; 45% of Group sales (FY 22/23: 45%)
- OEB LFL sales -4.6%, impacted by performance of outdoor and
'big-ticket' categories (kitchen, bathroom & storage)
- Resilient performance from OEB ranges within our tools &
hardware and building & joinery categories
- Developed and commenced roll-out of Green Star product marker,
making it easier for customers to identify and purchase products that have a
reduced impact on the environment
5) Develop our trade business:
- TradePoint LFL sales +0.7%, following a strong H2 performance (LFL
+3.6%) and outperforming B&Q retail
- Dedicated TradePoint sales partners now recruited in 39 stores,
with positive early results showing an uplift in sales to trade customers.
Business-to-business sales up c.25%
- TradePoint sales of £834m represent 22% of B&Q sales (FY
22/23: 22%); medium-term target of >£1bn of TradePoint sales
- Accelerating development of trade proposition in France, Poland,
Iberia and Romania. Testing and rolling out new trade loyalty programmes,
dedicated trade zones (in 42 stores), the introduction of new trade-focused
services (e.g., finance deals) and new trade sales partners, and the continued
curation of pro-specific product ranges. Very encouraging results to date on
sales and trade customer penetration. Aiming to double trade penetration in
France and Poland over medium term
6) Roll out compact store formats:
- Opened 9 new compact stores in the UK, France and Poland for a
total of 27 active tests
- High street compact store tests (e.g., 'B&Q Local' in the UK
and 'Casto' in France) continue to deliver encouraging learnings and results.
Testing in locations outside of major cities in FY 24/25
- Small retail park concepts in Poland ('Castorama Smart') being
adapted and iterated to find optimum blueprint
- Brico Dépôt France opened its first two compact stores; an
innovative 1,000 sqm format
7) Lead the industry in Responsible Business and energy efficiency:
- Continuing to prioritise pay awards to help colleagues manage
higher costs of living
- New target established for more than 20,000 colleagues to complete
an apprenticeship, traineeship or external qualification by 2030
- Reduced carbon footprint for own operations (scope 1 and 2
emissions) by 62.0% against a FY 16/17 base year, remaining ahead of our
1.5°C aligned science-based target
- Reduced intensity of scope 3 emissions from the supply chain and
customer use of products by 41.6% against a FY 17/18 base year, exceeding our
2025 target
- Leveraging OEB capabilities to build products that reduce impact
on the environment. Kingfisher's Sustainable Home Products (SHP) sales were
£6.4bn, representing 49% of Group sales (FY 22/23: 47%)
- 10% of Group sales from energy and water-saving products (FY
22/23: 10%)
8) Human, agile and lean:
- Employee Net Promoter Score (eNPS) of 57, up three points YoY,
setting Kingfisher within the top 5% of worldwide retailers
- Progress made in transitioning to a more agile and modular
technology operating model; moving from physical data centres to the cloud
through a new strategic partnership with Google
- Continuing to deliver on multi-year structural cost reduction
programmes to partially offset costs of inflation, expansion and space
changes, and our investment requirements over the medium term
- Decrease in net inventory of 4% YoY (in constant currency) driven
by lower purchasing, a reduction in seasonal and 'buffer' stock, product mix
and strategic reduction initiatives; partially offset by cost inflation and
new stores. Inventory in units (volume) down 4% YoY and product availability
up 2% YoY
- Actions underway to further optimise supply chain and inventory
management
The remainder of this release consists of eight main sections:
1) Financial performance summary and current trading & outlook
2) Trading review by division
3) France performance and profitability plan
4) Strategy update
5) Technical guidance for FY 24/25
6) Financial review (and, in part 2 of this announcement, the condensed
financial statements)
7) Glossary
8) Forward-looking statements
Footnotes
((1)) The Board has proposed a final dividend per share of 8.60p (FY 22/23
final dividend: 8.60p), resulting in a proposed total dividend per share of
12.40p in respect of FY 23/24 (FY 22/23: 12.40p). The final dividend is
subject to the approval of shareholders at the Annual General Meeting on 20
June 2024.
((2)) Net debt includes £2,367m of lease liabilities under IFRS 16 in FY
23/24 (FY 22/23: £2,444m).
((3)) 'Q1 24/25 LFL sales (to date)' represents the period from 4 February
2024 to 23 March 2024 compared against the equivalent period in the prior year
(i.e., 5 February 2023 to 25 March 2023). The figures are provisional and
exclude certain non-cash accounting adjustments relating to revenue
recognition.
((4)) Guidance assumes current exchange rates.
Non-GAAP measures and other terms
Throughout this release '*' indicates the first instance of a term defined and
explained in the Glossary (Section 7). 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 6).
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 23/24 can be downloaded from the
Investors section of our website at www.kingfisher.com/investors
(http://www.kingfisher.com/investors) .
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.com (http://www.kingfisher.com/) , and
subsequently available on demand.
For enquiries, please email investorenquiries@kingfisher.com
(mailto:investorenquiries@kingfisher.com) .
Financial calendar
Q1 24/25 trading update 21 May 2024
Annual General Meeting 20 June 2024(±)
Half year results 17 September 2024(±)
Q3 24/25 trading update 25 November 2024(±)
(±) Dates are provisional and may be subject to change
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) .
Section 1: Financial performance summary and current trading & outlook
Income statement summary
£m % Total Change % Total Change % LFL Change
2023/24 2022/23 Reported Constant currency Constant currency
Sales 12,980 13,059 (0.6)% (1.8)% (3.1)%
Gross profit 4,776 4,795 (0.4)% (1.6)%
Retail profit:
UK & Ireland 555 603 (8.0)% (8.0)%
France 139 195 (28.8)% (29.7)%
Poland 82 148 (44.5)% (47.4)%
Iberia 6 9 (34.6)% (35.5)%
Romania (18) (10) n/a n/a
Other(±) (30) (30) n/a n/a
Turkey (50% joint venture) 15 8 n/a n/a
Other International* 55 125 (56.0)% (57.5)%
Retail profit 749 923 (18.9)% (19.5)%
Central costs (60) (49) (22.9)%
Share of JV interest and tax (16) (4) n/a
Operating profit 673 870 (22.6)%
(before adjusting items*)
Net finance costs (105) (112) +6.1%
Adjusted PBT 568 758 (25.1)%
Adjusting items (93) (147) n/a
Statutory PBT 475 611 (22.3)%
(±) 'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and results from franchise and wholesale agreements.
Quarterly LFL sales
% LFL Change
Q1 23/24 Q2 23/24 Q3 23/24 Q4 23/24 FY 23/24
UK & Ireland (0.8)% +4.1% +1.1% (1.6)% +0.8%
-B&Q (1.6)% +3.3% +1.1% (1.8)% +0.4%
-Screwfix +0.7% +5.6% +0.9% (1.4)% +1.4%
France (4.1)% (3.5)% (8.6)% (8.0)% (5.9)%
-Castorama (3.1)% (2.3)% (6.7)% (8.0)% (4.8)%
-Brico Dépôt (5.2)% (4.8)% (10.6)% (7.9)% (7.1)%
Other International (8.1)% (9.3)% (7.6)% (4.9)% (7.7)%
-Poland (10.3)% (11.5)% (9.0)% (6.6)% (9.5)%
-Iberia +2.5% (4.2)% (3.9)% (0.8)% (1.8)%
-Romania (7.8)% (2.7)% (3.0)% +0.4% (3.3)%
Group LFL (3.3)% (1.2)% (3.9)% (4.3)% (3.1)%
Total e-commerce sales((1)) +4.6% +9.5% +7.4% +4.0% +6.4%
H1/H2 LFL sales by core and 'big-ticket' vs seasonal
% LFL Change
Core and 'big-ticket' Seasonal H1 23/24 Core and 'big-ticket' Seasonal H2 23/24
UK & Ireland +2.8% (2.1)% +1.7% (0.5)% +1.7% (0.2)%
-B&Q +2.7% (3.2)% +1.0% (0.4)% +0.7% (0.2)%
-Screwfix +3.0% +4.4% +3.1% (0.6)% +5.5% (0.2)%
France (2.1)% (8.5)% (3.8)% (7.9)% (10.3)% (8.3)%
-Castorama (0.9)% (7.0)% (2.7)% (7.3)% (7.6)% (7.3)%
-Brico Dépôt (3.4)% (10.8)% (5.0)% (8.5)% (14.1)% (9.3)%
Other International (8.6)% (9.3)% (8.8)% (5.6)% (11.4)% (6.4)%
-Poland (10.8)% (11.3)% (10.9)% (6.6)% (15.9)% (7.9)%
-Iberia +0.2% (6.4)% (1.2)% (1.1)% (10.6)% (2.4)%
-Romania (6.1)% (1.3)% (4.9)% (4.7)% +14.5% (1.6)%
Group LFL (1.0)% (5.9)% (2.2)% (3.8)% (5.9)% (4.1)%
Proportion of sales 78% 22% 86% 14%
Trading in Q4 23/24
LFL sales were down by 4.3% in Q4, broadly in line with Q3 (LFL -3.9%). We saw
more resilience in our tools & hardware, surfaces & décor and
building & joinery product sales relative to the performance of other
categories. The standout performance was in the seasonal ranges of our EPHC
(electricals, plumbing, heating & cooling) category, showing a significant
sequential improvement in the sales trend from Q3. E-commerce sales were up by
4.0% in Q4, driven by the strong growth of our e-commerce marketplaces in
B&Q and Brico Dépôt Iberia, together with good online sales growth at
both banners in France.
Our overall performance in Q4 was significantly affected by weak market growth
in December in the UK & Ireland and France. In the UK & Ireland,
trading in November was in line with the Q3 trend, followed by a weaker
December, resulting in slower building & joinery, EPHC and 'big-ticket'
category sales. We then saw a recovery in January to the same trend as
November. Core and 'seasonal' category sales were positive in January, offset
by weaker 'big-ticket' sales. B&Q, TradePoint and Screwfix all grew faster
than their respective markets in Q4, as measured by the British Retail
Consortium (BRC), Barclays and GfK.
In France, trading in November was slightly improved over the Q3 sales trend,
before deteriorating in December and recovering again in January. Against the
backdrop of weak consumer sentiment in France throughout the quarter, as
expected, both Castorama and Brico Dépôt performed broadly in line with the
market. Brico Dépôt delivered a sequential sales trend improvement in Q4
across its core, 'big-ticket' and seasonal categories, exiting the year in
January with its best monthly LFL sales performance since August 2023.
In Poland, Castorama improved on its sales trend of Q3 and delivered YoY
market share gains in the quarter (as measured by GfK) for the first time in
FY 23/24. Iberia and Romania also saw a sequential improvement in their Q4
sales trends, driven by core and seasonal categories.
Current trading
Q1 24/25 LFL sales (to date)((2)) are down by 2.3%. Trading in the UK &
Ireland is ahead of the sales trend in Q4 23/24, with positive core and
seasonal category sales YoY offset by weakness in 'big-ticket' sales. In
France, trading is consistent across all three categories, with the overall
sales trend ahead of Q4. In Poland, we have seen an improvement in the sales
trend relative to Q4, with positive 'big-ticket' and seasonal category sales
YoY.
Core, 'big-ticket' and seasonal volumes for the Group are all showing an
improvement versus the YoY volume trends in Q4.
Outlook for FY 24/25
To support our planning for FY 24/25, we have assessed various scenarios for
the growth of our total addressable home improvement markets in the UK &
Ireland, France and Poland in 2024, versus 2023. The "high case" and "low
case" scenarios are noted below, in constant currency and including expected
market space growth:
Our expectation of total addressable
home improvement market % change in 2024 (YoY)
Low case High case
UK & Ireland Low-single digit decline Flat
France Mid-single digit decline Low-single digit decline
Poland Flat Low-single digit growth
In the UK & Ireland, we observe a relatively resilient consumer, and
continue to expect repairs, maintenance and existing home renovation to be
supportive. However, we are mindful of the continued uncertainties facing
households (including from employment and mortgage rates), and also a nine to
12-month lag, on average, between housing demand and the realisation of home
improvement spend. As a result, our outlook for the UK & Ireland home
improvement market in 2024 is low-single digit % decline to flat YoY.
In France, we continue to see subdued consumer confidence and a weak housing
market, supporting our home improvement market outlook of a mid-single digit %
to low-single digit % decline YoY.
In Poland, inflation and interest rates have come down versus their peaks in
2023, and consumer confidence is gradually improving, with potential for
further improvement as households benefit from real wage growth this year. Our
outlook for the home improvement market in Poland is therefore flat to
low-single digit % growth YoY.
Against this backdrop, we will continue to focus on growing ahead of our
markets by leveraging our key strategic priorities. Furthermore, we remain
committed to the effective management of product costs and retail prices, as
we have demonstrated in recent years. We are targeting c.£120m of additional
cost reductions and productivity gains this year, to partially offset higher
pay rates and technology investments.
As a result of the above, we expect FY 24/25 adjusted PBT of c.£490m to
£550m, and free cash flow of c.£350m to £410m.
Footnotes
((1)) 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 and covers the total Group.
((2)) 'Q1 24/25 LFL sales (to date)' represents the period from 4 February
2024 to 23 March 2024 compared against the equivalent period in the prior year
(i.e., 5 February 2023 to 25 March 2023). The figures are provisional and
exclude certain non-cash accounting adjustments relating to revenue
recognition.
Section 2: Trading review by division
Note: all commentary below is in constant currency.
UK & IRELAND
£m 2023/24 2022/23 % Reported Change % Constant % LFL
Currency Change
Change
B&Q 3,849 3,835 +0.4% +0.3% +0.4%
Screwfix 2,538 2,365 +7.3% +7.3% +1.4%
Total sales 6,387 6,200 +3.0% +3.0% +0.8%
Retail profit 555 603 (8.0)% (8.0)%
Retail profit margin % 8.7% 9.7% (100)bps (100)bps
UK & Ireland sales increased by 3.0% (LFL +0.8%) to £6,387m, supported by
resilient e-commerce and trade customer sales. Core categories performed well,
supported by an improving underlying volume trend through the year, while
retail sales in 'big-ticket' categories (i.e., kitchen and bathroom &
storage) weakened in H2. Seasonal categories were impacted by adverse weather
patterns during the year, particularly in Q1 and Q4, but notably improved in
H2 relative to the first half of the year. B&Q, TradePoint and Screwfix
all gained market share (as measured by BRC, Barclays and GfK), strengthening
their competitive positions in the UK home improvement market. Gross margin %
increased by 40 basis points, reflecting effective management of inflation and
favourable channel mix impacts due to the strong growth of B&Q's
e-commerce marketplace.
Retail profit decreased by 8.0% to £555m (FY 22/23: £603m, at reported
rates), due to higher operating costs. Operating costs increased by 8.0%,
driven by cost inflation, including YoY increases in staff and energy costs,
higher costs associated with 45 net new store openings (YoY), and higher
technology spend. Cost increases were partially offset through structural
savings achieved by our cost reduction programme. Retail profit margin %
decreased by 100 basis points to 8.7% (FY 22/23: 9.7%).
B&Q total sales increased by 0.3% (LFL +0.4%) to £3,849m, with LFL sales
growth in surfaces & décor and tools & hardware categories and
resilient sales in building & joinery and outdoor. Sales trends slowed in
H2 (LFL -0.2%), particularly in Q4, with a weaker performance seen in
'big-ticket' categories and warmer weather impacting the sales of EPHC
(electricals, plumbing, heating & cooling). B&Q's total e-commerce
sales increased by 21.5% YoY, driven by the strong growth of B&Q's
marketplace. B&Q's e-commerce sales penetration was 13% (FY 22/23: 11%; FY
19/20: 5%). The business opened one medium-box (small retail park) and two
compact 'B&Q Local' stores in the year, and closed all eight of its
grocery concession stores. As of 31 January 2024, B&Q had a total of 311
stores in the UK & Ireland.
B&Q's trade-focused banner, TradePoint, delivered a good performance
supported by resilient demand from trade customers. LFL sales for TradePoint
were up 0.7%, despite tough comparatives, with penetration of B&Q sales at
22% (FY 22/23: 22%). A strong performance was seen in the surfaces &
décor and tools & hardware categories. In H2, TradePoint's LFL sales
improved to +3.6%. Sales to trade customers of 'big-ticket' categories also
improved in the second half of the year, with resilient sales of bathroom
& storage. TradePoint opened 21 new counters in the UK & Ireland,
extending its presence within the B&Q store network to 209 stores (67% of
stores).
Screwfix total sales increased by 7.3% (LFL +1.4%) to £2,538m, driven by
resilient demand from trade customers. Good performance was seen across most
categories, with tools & hardware, building & joinery and outdoor
performing particularly well. Sales trends slowed in H2 (LFL -0.2%) largely
due to a weak market in December and unseasonably warmer weather throughout
the period. The business gained significant market share in the year.
Screwfix's e-commerce sales increased by 1.6% YoY, with e-commerce sales
penetration of 57% (FY 22/23: 60%; FY 19/20: 33%), reducing slightly YoY due
to the increasing adoption of in-store digital browsing tablets.
Space growth and acquisitions contributed c.6% to total Screwfix sales.
Screwfix opened 51 new stores, including 46 in the UK and five in Ireland, and
closed one store in the UK, bringing its total to 922 as of 31 January 2024.
Screwfix plans to open up to 40 new stores in the UK & Ireland in FY
24/25, remaining on track to reach its medium-term goal of over 1,000 stores.
In March 2023, the business acquired the stock, intellectual property,
contracts and fixed assets of Connect Distribution Services Limited (renamed
Screwfix Spares), a leading retailer of appliance spares, accessories and
consumables to tradespeople and consumers. Since acquisition, Screwfix Spares
has performed in line with expectations, contributing c.1.8% to total Screwfix
sales growth. Monthly sales accelerated in H2, with the business reaching a
profit-making position by the end of the year.
Further progressing its international expansion plans, Screwfix opened 15
stores in France in the year (with 20 stores in total as of 31 January 2024),
and plans to open up to 15 stores in FY 24/25. The results for Screwfix
International are captured in 'Other International' - see below for further
information.
FRANCE
£m 2023/24 2022/23 % Reported Change % Constant % LFL
Currency Change
Change
Castorama 2,219 2,302 (3.6)% (4.8)% (4.8)%
Brico Dépôt 2,027 2,150 (5.7)% (6.9)% (7.1)%
Total sales 4,246 4,452 (4.6)% (5.8)% (5.9)%
Retail profit 139 195 (28.8)% (29.7)%
Retail profit margin % 3.3% 4.4% (110)bps (110)bps
France sales decreased by 5.8% (LFL -5.9%) to £4,246m, with the trading
environment impacted by low consumer confidence, particularly in the second
half of the year. In H2, LFL sales were -8.3%, with market weakness reflected
broadly across all categories. Unseasonal weather conditions also impacted the
performance of seasonal categories during the year (LFL -9.2%). Gross margin %
decreased by 10 basis points, reflecting the higher weighting of sales towards
special promotions ('arrivages') at Brico Dépôt, largely offset by effective
supplier negotiations and lower distribution costs and shrinkage rates. Gross
margin % increased by 20 basis points in H2.
Retail profit decreased by 29.7% to £139m (FY 22/23: £195m, at reported
rates), with lower gross profit somewhat offset by lower operating costs.
Operating costs decreased by 2.9% due to the active flexing of variable costs,
and structural savings achieved by our cost reduction programme. This was
partially offset by cost inflation, including YoY increases in pay rates and
energy costs, together with higher technology spend. In H2, in response to the
weaker trading environment, the business accelerated several structural cost
reduction initiatives and strengthened its actions around staff costs and
discretionary spend, resulting in an operating cost reduction of 4.4% YoY.
Retail profit margin % decreased by 110 basis points to 3.3% (FY 22/23: 4.4%,
at reported rates).
Castorama total sales decreased by 4.8% (LFL -4.8%) to £2,219m, broadly in
line with the market against a challenging consumer backdrop. Sales trends
slowed in H2 (LFL -7.3%), reflecting the weaker trading environment in that
time period. Market weakness was reflected broadly across the categories, with
EPHC also lapping strong sales of heating and energy efficiency products in
the prior year. Volume trends YoY in core and 'big-ticket' categories improved
in Q4, compared to Q3. Castorama's e-commerce sales increased by 4.9% YoY,
with e-commerce sales penetration of 6% (FY 22/23: 5%; FY 19/20: 2%). As of 31
January 2024, Castorama had a total of 95 stores in France.
Brico Dépôt total sales decreased by 6.9% (LFL -7.1%) to £2,027m, a weaker
performance relative to Castorama. Performance in H1 was impacted by a
reallocation of a portion of its marketing budget to digital, which proved
unsuccessful and was corrected in mid-July. Sales trends slowed in Q3 (LFL
-10.6%) as the trading environment weakened, with Brico Dépôt more exposed
than Castorama due to a relatively higher category weighting towards building
materials and EPHC, with plumbing, heating and insulation products also
impacted by milder weather and strong comparatives. Sales trends improved in
Q4, notably in EPHC and bathroom & storage, with Brico Dépôt's sales
broadly in line with the market (LFL -7.9%). For the year, e-commerce sales
increased by 14.7%, the fastest first-party (1P) e-commerce sales* growth rate
of all banners in the Group. E-commerce penetration reached 5% (FY 22/23: 4%;
FY 19/20: 2%). Brico Dépôt opened two stores during the year, with a total
of 125 stores in France as of 31 January 2024.
OTHER INTERNATIONAL
2023/24 2022/23 % Reported Change % Constant % LFL
Currency Change
Change
Sales (£m)
Poland 1,694 1,734 (2.3)% (7.4)% (9.5)%
Iberia 371 373 (0.5)% (1.8)% (1.8)%
Romania 269 285 (5.6)% (6.4)% (3.3)%
Other(±) 13 15 n/a n/a n/a
Other International 2,347 2,407 (2.5)% (6.5)% (7.7)%
Retail profit (£m)
Poland 82 148 (44.5)% (47.4)%
Iberia 6 9 (34.6)% (35.5)%
Romania (18) (10) n/a n/a
Other(±) (30) (30) n/a n/a
Turkey (50% JV) 15 8 n/a n/a
Other International 55 125 (56.0)% (57.5)%
Retail profit margin %
Poland 4.8% 8.5% (370)bps (370)bps
Other International 2.3% 5.2% (290)bps (280)bps
(±) 'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and results from franchise and wholesale agreements.
Other International total sales decreased by 6.5% (LFL -7.7%) to £2,347m,
reflecting tough prior year comparatives across all geographies (FY 22/23 LFL
+11.2%). Retail profit decreased by 57.5% to £55m (FY 22/23: £125m, at
reported rates), largely reflecting the retail profit decline in Poland in H1
(£59m). Retail profit margin % decreased by 280 basis points to 2.3% (FY
22/23: 5.2%, at reported rates).
Poland total sales decreased by 7.4% (LFL -9.5%) to £1,694m, against strong
prior year comparatives (FY 22/23 LFL +13.8%) and a challenging trading
environment. Market weakness was reflected broadly across the categories, with
EPHC lapping very strong prior year comparatives. Sales trends improved in H2
(LFL -7.9%, versus H1 LFL -10.9%), supported by core category sales, and in
line with a gradual improvement in the consumer environment. The business
exited the year with Q4 LFL of -6.6%, compared to the 'trough' second quarter
of -11.5%, and sales trends have continued to improve into the new financial
year. Castorama's market share remained above FY 21/22 levels for the full
year and, on a YoY basis, gained share in Q4 (as measured by GfK). Castorama's
e-commerce sales decreased by 32.6% YoY, following some temporary disruption
arising from the implementation of its new digital technology stack in H1.
E-commerce sales penetration was 3% (FY 22/23: 5%; FY 19/20: 2%).
Space growth contributed c.2% to total Poland sales. Castorama opened five
stores in FY 23/24 (three big-box, one medium-box and one compact 'Castorama
Smart' store), bringing its total to 102 stores in Poland as of 31 January
2024.
Gross margin % decreased by 20 basis points, reflecting higher customer
participation in promotional activity and sales mix. This was largely offset
by effective management of inflation and supplier negotiations, and a lower
stock provision movement compared to the prior year. Gross margin % increased
by 150 basis points YoY in H2. Retail profit decreased by 47.4% to £82m (FY
22/23: £148m, at reported rates) due to a lower gross profit and an increase
in operating costs. Despite adjusting variable costs to the challenging
environment and realising further savings from our structural cost reduction
programme, operating costs increased by 5.6%. This was driven by high cost
inflation (including YoY increases in pay rates and energy costs), higher
technology spend, higher costs associated with five new store openings (YoY),
and charges related to ineffective foreign exchange hedges. In H2, the
business strengthened its cost initiatives by further flexing staffing levels,
lowering discretionary spend, and rephasing certain investments (including
fewer store openings), resulting in operating costs being limited to an
increase of 1.7% YoY. Retail profit margin % decreased by 370 basis points to
4.8% (FY 22/23: 8.5%, at reported rates), with the H2 retail profit margin %
improving sequentially to 5.8%, 80 basis points lower YoY (H2 22/23: 6.6%, at
reported rates).
Iberia total sales decreased by 1.8% (LFL -1.8%) to £371m. Core and
'big-ticket' category sales were resilient (LFL -0.4%), while seasonal
categories (LFL -8.0%) were impacted by unseasonal weather from Q1 onwards.
The development of Iberia's trade proposition supported good YoY growth in its
building & joinery and kitchen categories. Retail profit decreased to £6m
(FY 22/23: £9m, at reported rates), reflecting lower sales and gross margin
%, partially offset by lower operating costs, down 0.8% YoY.
Romania total sales decreased by 6.4% to £269m (LFL -3.3%), against strong
prior year comparatives (FY 22/23 LFL +7.8%) and a challenging trading
environment. Sales trends improved in H2 (LFL -1.6% vs H1 -4.9%), driven by an
improvement in core and seasonal category sales, with LFL sales in Q4 slightly
positive (+0.4%). Sales in the EPHC category were particularly strong, with a
resilient performance in outdoor and bathroom & storage. Romania's retail
loss increased to £18m (FY 22/23: £10m reported retail loss), reflecting
lower sales and gross margin %. Operating costs decreased by 3.1%, with cost
inflation more than offset by our structural cost reduction initiatives
including reduced energy usage in stores.
In Turkey, Kingfisher's 50% joint venture, Koçtaş, contributed £15m of
retail profit (FY 22/23: £8m, at reported rates). The increase in retail
profit largely reflects accounting under high inflation, and was more than
offset by related higher interest rates recorded in our share of Koçtaş'
interest and tax. The overall contribution of Koçtaş was therefore a net
loss of £1m (FY 22/23: £4m net profit contribution). Net of store closures,
the business added 13 new stores (one big-box and 12 compact) in their
financial year to 31 December 2023, bringing its total store count to 368.
'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and franchise and wholesale agreements. Due to these businesses
being in their early investment phase, a combined retail loss of £30m (FY
22/23: £30m reported retail loss) was recorded, largely driven by Screwfix
France as the business invested in the opening of new stores. Screwfix has a
total of 20 stores in operation in France as of 31 January 2024, having opened
15 in FY 23/24. Sales from these stores continue to show an encouraging trend,
supported by an expanded product range of c.14k SKUs*, and the launch of
third-party trade credit and Sprint one-hour home delivery. The business also
launched as a pure-play online retailer in six additional European countries
in Q3. As reported in our half-year results in September, our two B&Q
franchise stores in Saudi Arabia have now closed, and we are re-focusing
efforts on wholesale and franchise agreements in other markets. We currently
have wholesale agreements in place in three countries in Europe and the Middle
East, whereby certain OEB products are supplied to its retailers.
RETAIL BANNER EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area((1))
(FTE) numbers (000s m(2))
at 31 Jan 2024
at 31 Jan 2024 at 31 Jan 2024
B&Q 15,187 311 2,210
Screwfix 9,919 922 56
UK & Ireland 25,106 1,233 2,266
Castorama 9,878 95 1,153
Brico Dépôt 7,820 125 877
France 17,698 220 2,030
Poland 11,740 102 851
Iberia 1,804 31 195
Romania 2,178 32 230
Other((2)) 255 20 1
Other International 15,977 185 1,277
Total 58,781 1,638 5,573
((1)) Screwfix sales area relates to the front of counter area of an outlet.
((2)) 'Other' consists of Screwfix International, NeedHelp, and franchising
and wholesaling.
Section 3: France performance and profitability plan
Background
In June 2020, we set out a plan to 'fix' strategic and operational issues
faced by our banners in France, emanating from previous years. This included
putting in place new leadership and teams, making significant improvements in
our technology, supply chain and logistics operations, and restoring more
local autonomy to manage the business needs and requirements of our banners in
France (including broadening product ranges, implementing new trading
approaches, and investing in price at Brico Dépôt). Castorama also closed
nine underperforming stores.
In September 2022 we said that the 'fixes' in France were largely complete -
resulting in clear differentiation between Castorama and Brico Dépôt, more
competitive prices, better product availability, higher levels of customer
satisfaction, and a significant improvement in our sales performance relative
to the market (as measured by Banque de France* data). These measures also
enabled us to successfully navigate the banners through the COVID pandemic, as
well as more recent macroeconomic and consumer challenges.
Over the last four years we have also put into place more strategic
initiatives, consistent with our 'Powered by Kingfisher' strategy, to move
forward the long-term customer propositions for Castorama and Brico Dépôt.
These included accelerating the e-commerce capabilities of our French banners
(including the creation of a 'hub' store network to facilitate faster
fulfilment, and introducing more C&C options) and further differentiating
Castorama and Brico Dépôt's offer through leveraging Kingfisher's OEB
capabilities. In addition, we have started to develop the trade customer
proposition at both banners, trialled new compact store formats, started a new
retail media business, and developed more comprehensive in-store and digital
services for our customers, including through the use of Kingfisher's data and
AI capabilities.
Our French banners have also been active in structurally lowering their cost
base across multiple areas, including in supply chain and logistics, property,
GNFR and overheads. Over £150m of cost has been structurally removed from the
businesses over the last four years. Furthermore, against the backdrop of an
uncertain consumer environment in more recent times, they have continued to
actively manage variable costs to better align to trading conditions. This has
included strengthened actions around staff costs and discretionary spend,
which in H2 23/24 resulted in an operating cost reduction of 4.4% YoY, despite
significant pay rate and energy inflation.
Taking France to the next level - a new plan focused on simplicity,
performance and profitability
With our banners well positioned both strategically and operationally, we are
today announcing a new plan for Castorama and Brico Dépôt, designed to drive
the next level in our performance and profitability in France.
The plan is centred on three focus areas:
· Simplifying the France organisation,
· A clear and actionable plan for Castorama, and
· Building on the exciting potential of Brico Dépôt
These actions support a medium-term retail profit margin target for France of
c.5% to 7%, and are explained in detail below.
Simplifying the France organisation
With clear strategies in place for Castorama and Brico Dépôt, the time is
right to simplify the structure in France to make banner decision-making more
agile - similar to the proven model in the UK & Ireland:
· Effective from the end of April 2024, the 'France'-level
management structure will be dissolved, allowing our banners more autonomy and
speed to make operational decisions and allowing for more streamlined head
office operations
· France-level joint operational responsibilities including human
resources, finance and supply chain will be transferred to the two banners
where appropriate
· A limited number of cross-banner functions will be managed across
banners to maintain joint synergies where efficient; for example, in the area
of retail media
· Leadership changes:
- Alain Rabec, CEO of France, will retire at the end of September
2024. Alain joined Kingfisher in October 2019 and has overseen the significant
progress made by both banners described above. We thank Alain for his many
contributions to Kingfisher and wish him well
- Pascal Gil will become CEO of Castorama France at the end of April
2024. He will remain a Kingfisher Group Executive team member. Pascal started
his career at Castorama France, before leading Brico Dépôt Iberia and then
Brico Dépôt France, before taking the role of CEO of Castorama Poland in
April 2022. Details of Pascal's successor as CEO of Castorama Poland will be
announced in due course
- Laurent Vittoz will continue as Managing Director of Brico
Dépôt, supported by Alain Rabec who will remain on the Kingfisher Group
Executive team until his retirement
A clear and actionable plan for Castorama France
Despite making significant progress over the last four years, Castorama's
retail profit margin % remains lower than the Group average, and also that of
Brico Dépôt France.
We have developed a plan with three core priorities to boost Castorama's
performance, strengthen its resilience, and drive up its profitability over
the medium term: (1) restructuring and modernising the store network, (2)
improving operating margin efficiency and (3) growing sales densities.
1) Restructuring and modernising the store network
Castorama operates 95 stores in France, of which we have assessed
approximately one third as our lowest performing stores. We are today
announcing a store restructuring and modernisation plan to address these
stores over the medium term. In FY 24/25, we will commence work on 13 of our
lowest performing stores under one of four main pathways:
· Rightsizing - we have identified several 'big-box' stores across
the low-performing Castorama portfolio where we have surplus space. This is
based on our analysis of store economics, but also demand in the local area,
proximity to other stores, and the number of stores we need to achieve
national coverage for home deliveries, as part our e-commerce strategy. Over
the last two years we successfully rightsized two Castorama stores with
encouraging results. These rightsizings resulted in an average space reduction
of c.25% (taken over by discounter retailers, thereby driving incremental
traffic), sales density improvements of c.40%, and a c.600 basis points
improvement in the stores' retail contribution margin % and an anticipated
payback on investment within four years. We will commence the rightsizing of
three Castorama stores in FY 24/25
· Modernising store formats - we successfully carried out a
pervasive Castorama store refit in FY 23/24. Over a six-month period between
September 2022 and March 2023, we modernised the Castorama Englos store by
reorganising the layout from 130 aisles to just six key areas, making the
customer journey simpler while creating a fresh and 'open plan' store
environment, with a focus on design inspiration and home improvement projects.
Significant improvements were also made to in-store digital and fulfilment
services, the trade customer experience, and showcasing our energy efficiency
ranges and services. We expect payback of our investment within four years.
The refreshed Englos store has delivered strong results including
significantly improved sales growth, strong 'big-ticket' sales, higher
customer traffic and NPS scores, and in FY 23/24 became one of Castorama's top
10 performing stores. We are planning to repeat the refit successfully applied
at Englos to one further Castorama store in FY 24/25, with six additional
low-performing stores benefiting from a refresh
· Brico Dépôt transfer - over the last three years, Castorama has
successfully converted two of its low-performing stores into the more
profitable Brico Dépôt format. Our Pontault-Combault conversion saw a
reduction of selling space of c.50%, a more than doubling of sales densities
and a significant uplift in profitability. While these conversions have
delivered encouraging results, there is a limit to the number of Castorama
transfers that can be completed given the size of Castorama stores (relative
to Brico Dépôt) and the proximity to existing Brico Dépôt stores. We are
planning to transfer one Castorama store to a Brico Dépôt format in FY 24/25
· Franchising - the franchise model is commonplace in the French
home improvement industry, and in French retail in general. Under the model,
Castorama would transfer the management of store operations to a franchisee
partner, along with the right to use the Castorama brand, in exchange for a
royalty fee. The franchisee would also leverage Kingfisher's capabilities,
including its store technology systems, leading OEB product ranges (via
wholesale), and Group buying scale. All store operating costs - such as staff
and property costs - would transfer to the franchisee. The franchisee's focus
would be to grow sales, reduce shrinkage and improve operating efficiencies to
drive higher profitability. Longer term, franchising also gives us the
optionality to expand our footprint in geographic 'white spaces' and smaller
catchments in a capex-light manner. We are planning to test the franchise
model in two Castorama stores in the next 12 months, with an immediate focus
on finding the right franchise partner and optimising commercial and financial
terms
2) Improving operating margin efficiency
The second core priority for Castorama is to further improve operating
efficiency through strengthening its cost reduction plan, leveraging
Kingfisher's AI and data-driven solutions, and scaling Kingfisher's higher
margin initiatives around e-commerce marketplace and retail media:
· Strengthening cost reduction plan - as discussed above, Castorama
France has made strong progress in lowering its cost base across multiple
areas. Significant opportunity remains to become even leaner. Our focus areas
include:
- Store productivity - further optimising store operations in line
with seasonal changes in demand, and process improvements through increased
use of technology such as self-checkout terminals and use of electronic labels
- Procurement & other costs - continuing to reduce energy usage,
strengthening security measures in-store to reduce shrinkage, and adopting
optimised, system-enabled procurement practices to drive buying efficiency and
scale
- Head office costs - more efficient head office operations, in line
with the simpler management structure in France
- Supply chain and logistics - further increasing the use of
cross-docking sites to facilitate the movement of inventory from manufacturers
to stores (with little or no storage required at distribution centres), and
the reduction of logistics space through inventory reduction
· Leveraging markdown, clearance and promotional effectiveness
solutions - Castorama plans to implement Kingfisher's AI-driven solutions in
FY 24/25. Following successful implementation at B&Q in FY 23/24, these
solutions have resulted in improved sales, gross margin % and sell-through of
stock. Please refer to 'Build a data-led customer experience' in Section 4 for
further details
· Scaling higher margin initiatives - in FY 23/24, we signed a
Group-wide partnership with CitrusAd to enable advertising for product display
and sponsored search. Castorama was the first banner to launch this
proposition, generating advertising income through its retail media. In H2
23/24, Castorama began marketing retail media to all its suppliers. We believe
retail media has the future potential to reach up to 3% of e-commerce sales as
it scales - please refer to 'Build a data-led customer experience' in Section
4 for further details. Following successful launches at B&Q and Brico
Dépôt Iberia, Castorama France launched its e-commerce marketplace in March
2024, and will prioritise scaling up the proposition in FY 24/25 to deliver
sales of 3P products, incremental 1P sales, increased traffic, new customers
to Castorama and, over time, a high incremental profit contribution. Please
refer to 'Accelerate e-commerce through speed and choice' in Section 4 for
further details
3) Growing sales densities
The final core priority is to leverage Kingfisher's capabilities in OEB,
e-commerce marketplace, trade and energy efficiency to grow sales densities:
· Wider ranges and marketplace - Castorama will leverage
Kingfisher's OEBs, as well as leading national and international brands, to
significantly extend its product offer over the next three years with a focus
on key categories where they have market share leadership, ranges where there
is scope for differentiation, and energy efficiency ranges. This will be
complemented by additional 3P SKUs made available via the launch of
Castorama's e-commerce marketplace, significantly expanding Castorama's
current offer of c.70k products
· Growing trade penetration - Castorama will leverage Kingfisher's
trade 'Centre of Excellence' to grow trade customer penetration, and has
developed a plan to increase the pace of trade tests, supported by the launch
of a trade loyalty programme in FY 24/25. In H1, Castorama will test dedicated
trade counters and sales partners in up to 20 stores
· Capture demand for green renovation - Castorama will focus on
offering new energy efficiency product ranges and services to make green
renovation projects easier and more accessible for customers, including
introducing new project design and funding simulation tools. Over time, energy
and water efficiency product zones will be installed in stores with dedicated
staff showcasing our ranges and services. In-home 'energy audit' services will
be made available from all stores and online in early FY 24/25 to help
customers identify opportunities to save energy in their homes through the
purchase of our products. In FY 24/25, we will pilot customer service
initiatives to make state subsidies easier for customers to access. We will
also extend our network of installers to support renovation projects
Building on the exciting potential of Brico Dépôt
Brico Dépôt is one of the world's leading discount home improvement
retailers. As described above, significant work has taken place to restore
Brico Dépôt's 'discounter DNA' - including introducing new value-oriented
ranges, investing in price and trading events - and the business has a much
leaner operating model.
As the business now enters its next stage of growth, Brico Dépôt has aligned
its strategy across four key priorities to further enhance its performance:
· Driving LFL sales - Brico Dépôt will broaden its product ranges
by introducing more OEBs at lower price points, and more products aimed
specifically at the trade customer and energy efficiency. To strengthen its
price leadership, the business will seek to further invest in price in certain
key ranges. The business will also strengthen its promotional activities to
boost in-store traffic and sales conversion, including the return of its
annual printed catalogue and more loyalty-driven marketing
· Capturing the trade opportunity - growing trade customer
penetration is a priority for Brico Dépôt. The business launched 24 trade
tests in FY 23/24 to provide a differentiated proposition to trade customers
including dedicated trade desks, customer service experts and a new trade
loyalty programme. Early results have been very positive, more than doubling
trade sales penetration in the 24 stores. The programme will be rolled out to
the entire Brico Dépôt France network in FY 24/25. Please refer to 'Develop
our trade business' in Section 4 for further details
· Testing and optimising the 1,000 sqm compact store format - Brico
Dépôt successfully opened its first compact store in Cahors, France,
followed by a further store opening in H2. The concept allows customers to
access the entire core Brico Dépôt range (c.11k SKUs) in an area of under
1,000 sqm, with a separate space to allow larger and bulk purchases to be
collected. Customer reaction has been positive to date, with the focus in FY
24/25 on optimising the proposition. Please refer to 'Roll out compact stores'
in Section 4 for further details. Assuming the format is validated, Brico
Dépôt France is well positioned to penetrate more of the geographic 'white
spaces' that exist in France. Brico Dépôt may also consider the franchising
model as an option for the expansion of its network
· Further improving costs and productivity - Brico Dépôt has
started to deploy numerous projects to accelerate store productivity including
electronic price labels in our stores (to allow price changes to be
implemented more efficiently) and the implementation of self-checkout
terminals. These projects will be rolled out across the Brico Dépôt France
network in FY 24/25. We are also continuing to optimise store colleague
operating models, with a more tailored approach to serving seasonal changes in
demand. In addition, with the support of Kingfisher, the business is
continuing to drive structural cost savings in the areas of supply chain and
logistics and GNFR. Please refer to 'Human, agile and lean' in Section 4 for
further details
Section 4: Strategy update
Better Homes. Better Lives. For Everyone. At Kingfisher, we believe a better
world starts with better homes and we strive to help make that happen.
Put simply, our strategic plan - 'Powered by Kingfisher' - 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.
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 product development
and supply (through our industry-leading own exclusive brands), access to
leading-edge technology, digital and data capabilities, as well as
international support, sourcing and buying scale.
We are continuing to invest for growth in multiple areas of the business,
underscoring our confidence in the medium to longer-term outlook for home
improvement growth in our markets. We are pleased with the progress we have
made over the last year, against the backdrop of what remains an
extraordinarily challenging macroeconomic and consumer environment in our
markets.
The following section covers the progress made in FY 23/24 against our
strategic plan:
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 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. We believe net space growth will
drive an uplift in sales of c.+1.5% to +2.5% per annum over the medium term.
B&Q
· Successfully rolled out new 'B&Q Local' sub-branding across
its high street stores, with 10 such stores currently open across London.
'B&Q Local' stores address the customer needs of immediacy and convenience
in locations with high footfall. We will continue to optimise the format's
offer and trading strategy in FY 24/25
· Opened two new 'B&Q Local' stores in FY 23/24 and closed all
eight of its 'grocery concession' format store tests
· We believe there are around 50 catchments or geographic 'white
spaces' in the UK where B&Q is currently under-represented. Please refer
to 'Roll out compact store formats' below for further details of B&Q's
evolving store footprint
TradePoint
· B&Q's trade-focused banner, TradePoint, opened 21 new trade
counters in FY 23/24, extending its presence within the B&Q store network
to 209 (67% of stores)
· TradePoint will begin tests in FY 24/25 to increase TradePoint's
presence in smaller stores. Please refer to 'Develop our trade business' below
for further details of TradePoint's progress
Screwfix - UK & Ireland
· Opened 51 stores, including 46 in the UK and five in the Republic
of Ireland, bringing the total number of stores to 922 in both countries as of
31 January 2024
· Planning for up to 40 new stores in the UK & Ireland in FY
24/25, keeping it on track to reach its medium-term goal of over 1,000 stores
Screwfix - International
· Screwfix is very well positioned to address the light-trade
segment in France, which has an estimated total market size of c.€30bn.
During the year, Screwfix opened 15 stores in France, bringing its total to 20
stores in operation as of 31 January 2024 (with a further two stores opened
post year-end)
· Pleased with the customer reaction to date, with the business
recording strong store net promoter scores (on par with Screwfix UK stores),
and national brand awareness on par with our closest competitor in France.
During the year we expanded our product range to c.14k SKUs, and widened our
proposition by launching third-party trade credit and Sprint one-hour home
delivery services
· Planning to open up to 15 stores in FY 24/25 with a continued
focus on growing brand awareness
· Assuming the success of the format is confirmed, we see the
potential for more than 600 stores in France over the longer term
· Launched Screwfix as a pure-play online retailer in six European
countries (Poland, Spain, Belgium, the Netherlands, Sweden and Austria)
leveraging Screwfix's distribution centre in France for fulfilment. Encouraged
by the initial reactions and we continue to refine our proposition for these
markets. Over the longer term, we intend to serve up to 20 European countries
via this approach
Castorama France
· Please refer to 'France performance and profitability plan' in
Section 3 for further details
Brico Dépôt France
· As one of the home improvement industry's best hard discounters,
Brico Dépôt France is well positioned to penetrate more of the geographic
'white spaces' that exist in France
· Opened its first two compact stores in FY 23/24 - an innovative
1,000 sqm format. Positive customer reaction to the format to date, with a
focus in FY 24/25 on optimising the proposition
Castorama Poland
· Opened five stores in FY 23/24 (three big-box, one medium-box and
one compact 'Castorama Smart' store). Planning to open a further five stores
in FY 24/25
· Castorama plans to address the attractive market growth
opportunity and significant 'white spaces' in Poland through the opening of up
to 75 medium-box and compact stores over the next five years
Koçtaş (Kingfisher's 50% joint venture in Turkey)
· We believe the longer-term growth opportunity for the home
improvement industry in Turkey is significant. Net of store closures, Koçtaş
added 13 new stores (one big-box and 12 compact) in their financial year to 31
December 2023, bringing its total store count to 368
b) Accelerate e-commerce through speed and choice
We will continue to grow our e-commerce sales and participation, with the
ambition of reaching 30% of Group sales from e-commerce channels (one third of
which from marketplace). We will do this by offering our customers 'speed' -
faster fulfilment of orders through leveraging our store estate - and 'choice'
- broader product choice, including via our e-commerce marketplace
propositions. This will be supported by the ongoing modernisation and
simplification of our technology landscape, which is unlocking the rapid
development of more customer-centric and personalised mobile apps, digital
tools and services.
FY 23/24 performance highlights
· Total e-commerce sales, which include gross sales from
third-party (3P) e-commerce marketplace transactions, as well as 1P e-commerce
sales, reached £2.3bn in FY 23/24, an increase of 6.4% YoY (in constant
currency). Driven by strong marketplace sales growth at B&Q and higher 1P
e-commerce sales at Screwfix and both banners in France
· Overall e-commerce sales penetration was 17.4% (FY 22/23: 16.3%;
FY 19/20: 7.9%)
· Click & collect (C&C) sales up 1% YoY, accounting for 67%
of total e-commerce sales (FY 22/23: 71%) and 88% of 1P e-commerce orders (FY
22/23: 87%)
· Home delivery sales up 20% YoY, reflecting the development of our
e-commerce marketplace and same-day delivery propositions
· 93% of the Group's 1P e-commerce orders were picked in-store (FY
22/23: 91%); excluding Screwfix: 87% (FY 22/23: 89%)
· Mobile sales up 8% YoY, accounting for 59% of our 1P e-commerce
sales (FY 22/23: 55%). Mobile app sales up 41% YoY
· Marketplace GMV* of c.£200m for B&Q (includes VAT and
returned and cancelled orders). B&Q marketplace gross sales of £154m for
the year, representing marketplace participation of 31% in FY 23/24 (i.e.,
B&Q's marketplace gross sales divided by B&Q's total e-commerce
sales). Marketplace participation of 13% at Brico Dépôt Iberia
Leveraging our store estate to offer customers speed and convenience
· Store-based fulfilment - moving to store-based picking and
fulfilment over the last four years has been critical in enabling us to serve
customers more efficiently. 53 B&Q stores are being used as 'digital hubs'
for fulfilling home deliveries, serving nearly 100% of the UK. These hub
stores were selected based on their catchment and the depth of their in-store
range. During the year we made order preparation even faster by carrying out
an extensive benchmark of C&C practices across our banners, with
recommendations for improvement by an external party. This has driven
significant decreases in pick times across the Group. We also made
enhancements to our digital colleague apps, resulting in optimised picking
routes and more accurate stock levels being displayed online. This contributed
towards an 8% reduction in online order cancellations at B&Q and Castorama
France
· Click & collect - our banners continued to make enhancements
to their respective C&C customer journeys to improve speed and
convenience. C&C is our most popular online fulfilment option and our new
store format trials are also increasing C&C options for customers,
particularly our high street compact stores. Castorama Poland now defaults all
C&C orders to collection from its store locker network, increasing
customer convenience with 24/7 collection availability
· Home delivery - we are gradually introducing more options around
same-day, next-day and specific-day delivery options. We continue to expand
the Screwfix Sprint service in the UK (which offers delivery direct to home or
site within one hour), which is now available in 334 stores, covering around
45% of UK postcodes. During the year, Screwfix began advertising the
proposition widely through television, radio, press, website and in-store
campaigns, resulting in a significant increase in customer awareness of the
service, and recruiting more than 25k customers using it for the first time,
contributing to an increase in Sprint sales of over 100% YoY. The offer has
proven particularly popular in London, accounting for more than 60% of Sprint
orders. In November 2023, Screwfix partnered with Deliveroo to offer a limited
range of Screwfix products on-demand
· Online customer journey - to enhance our customers' online
experience, we have simplified our technology architecture, enabling changes
to be made faster to our technology products and platforms. During the year we
implemented Fasterize, a software-as-a-service solution, in Castorama France
following successful implementation in Brico Dépôt France, leading to a 30%
improvement in Castorama's web and mobile speed and page-load times, and a
10-point improvement in customer NPS. In FY 23/24, Brico Dépôt France's 1P
e-commerce sales grew the fastest of all our banners in the Group. Our
priority in FY 24/25 is to deliver core architectural modernisation to our
search and browse pages (from the homepage through to product pages) across
B&Q, Castorama France and Castorama Poland. This will drive further site
speed improvements for our customers
Offering our customers more choice on what they shop and how they shop
· Customer payment options - implemented 'Buy Now, Pay Later' and
'Pay in Instalments' options, available via PayPal, in the UK and France. At
B&Q, we implemented a new third-party credit solution offering flexible
credit, allowing customers to decide when and how they repay their credit
loans
· Mobile - mobile remains our largest and fastest-growing channel
(versus desktop and tablet). During the year we tested various mobile and
app-exclusive events to drive sales and further mobile penetration. For
example, in Q4 Castorama France launched app-exclusive offers which increased
e-commerce participation by 25% YoY, with app sales accounting for almost half
of all e-commerce sales during the promotion. Earlier in the year Screwfix
integrated Braze, a 3P customer relationship management (CRM) platform, into
the Screwfix app to deliver personalised offers and deals for their most
frequent trade customers. Our key mobile priorities for FY 24/25 are to
further improve app capabilities across the Group, and optimise our mobile
marketing and trading strategies
· Marketplace - during the year we continued to scale our
e-commerce marketplaces at B&Q and Brico Dépôt Iberia, leveraging the
Kingfisher platform built in conjunction with our key partners Mirakl and
Salesforce. We are building leading marketplace propositions for our customers
by directly connecting with the best global home improvement merchants,
leveraging strategic partnerships with third-party aggregators such as
Octopia, Channel Advisor, ShoppingFeed, BeezUp, Linnworks and Just
Applications. At B&Q, there are now approximately 1,100 carefully selected
3P merchants live on diy.com, with products across all home improvement
categories, enabling B&Q to offer over 1.2 million additional home
improvement SKUs compared to its previous 1P offer of c.40k products. In FY
24/25, B&Q aims to reach c.2 million SKUs. Brico Dépôt Iberia's
marketplace is also growing rapidly, reaching 100k SKUs via over 150 merchants
· Marketplace strengthening our 1P business - the diversity of SKUs
offered by the marketplace is highly complementary to our existing 1P offer.
Bed frames and mattresses were among our top-selling marketplace products in
FY 23/24, making furniture one of the largest categories, both in sales and in
assortment size (c.100k products). In FY 23/24, 50% of people who purchased a
marketplace product were new customers who had never shopped with B&Q
before. We also saw that approximately 10% of customers who purchased a 3P
marketplace product for the first time subsequently purchased a 1P product on
diy.com. As the marketplace matures and customers become more familiar with
using it, we expect this 'transference' rate to continue growing, increasing
the strategic value for our banners
· Marketplace priorities - Kingfisher developed its marketplace
technology with low-cost scalability in mind. Following the successful launch
at B&Q in March 2022, e-commerce marketplaces were subsequently rolled out
at Brico Dépôt Iberia in November 2022 and at Koçtaş, our 50% joint
venture, in Q1 23/24. We successfully launched Castorama France's e-commerce
marketplace earlier this month, which we believe will drive higher sales
densities, and greater resilience and profitability over the medium term.
Please refer to 'France performance and profitability plan' in Section 3 for
further details. We are also aiming to launch marketplace at Castorama Poland
in the coming months. Our priorities this year also include the opening of
B&Q's marketplace to non-UK sellers as well as the launch of a retail
media proposition for marketplace sellers. Over the longer term, our ambition
is to reach 30% e-commerce sales penetration, with one third of this
representing marketplace gross sales
c) Build a data-led customer experience
Powered by Kingfisher, our banners are leveraging data and artificial
intelligence (AI) to build customer-centric tools and solutions, support
better commercial decision-making and higher productivity, thereby unlocking
significant new sources of revenue, profit and cash. In addition, with c.1bn
customer visits per annum across our e-commerce touchpoints, we believe that
many of our suppliers - including leading national and international home
improvement brands - could become advertisers. Over time, we see the potential
for retail media revenues to reach up to 3% of the Group's total e-commerce
sales.
We are seeing strong results from our in-house data and AI capabilities, and
are continuing to invest in these areas. We have adopted more efficient ways
of working to allow us to test and learn quickly. To support internal
development, we have invested in new technologies including Nucleus, our
Group-wide data platform which gives us simpler access to Kingfisher's data
via a centralised repository. We have also developed an in-house AI engine
called Athena. Athena helps Kingfisher manage and integrate multiple AI
technologies, allowing us to quickly adopt new AI tools as they are developed.
We have aligned our data strategy across four key pillars: top-line growth,
strengthening margin, streamlining operations and new income streams.
Top-line growth
· Recommendation and personalisation engines - Kingfisher has
developed a suite of solutions to offer best product options across multiple
channels (including web and app) in multiple formats such as 'frequently
bought together' carousels, 'substitute products' or direct personalised
offers based on customer shopping trends and preferences. During the year we
introduced these recommendation engines to B&Q (including TradePoint),
Screwfix, Castorama France and Brico Dépôt Romania. B&Q, where the
solutions have been in place the longest, has seen over 10% of its e-commerce
sales derive from product recommendations. Our recommendation engine has
driven a more than 100% increase in web sales from product recommendations
compared to our legacy third-party solutions. Results in-app have also been
strong, generating twice the conversion of web recommendations
· Customer marketing - during the year, B&Q and Screwfix
deployed new CRM capabilities powered by Braze, enabling the management of
customer relationships through specific promotions and personalised offers
sent by email, SMS and in-app notifications. Screwfix subsequently ran
multiple app-based campaigns offering incentives based on shopping frequency,
with very strong results
· E-commerce support - in Q3, Castorama France launched 'Hello
Casto', a new digital virtual assistant that uses generative AI, powered by
our in-house AI engine, Athena. Customers can converse directly with 'Hello
Casto' online and receive tailored advice and recommendations for their home
improvement projects. In February 2024, 'Hello Casto' received industry
recognition, having been awarded the Gold Prize for Innovation by the French
e-commerce trade association, FEVAD
Strengthening margin
· Optimising markdowns and clearance - Kingfisher has developed
powerful new AI-based solutions to support the optimisation of markdown and
clearance processes in-store and online. These tools were piloted at B&Q
during H1 and, following successful early results, fully implemented during
H2. The pilots delivered encouraging gross margin % improvements, while also
increasing the sell-through of seasonal stock and improving the efficiency of
range changes. We plan to roll out at Castorama France in FY 24/25, followed
by Castorama Poland
· Promotional effectiveness - our AI capabilities were also
leveraged to develop solutions to forecast, assess and optimise promotional
effectiveness. Using AI to simulate the potential impact of different
promotional levers allows our banners to compare the efficacy of various
promotional mechanics and measure performance on a consistent basis. Following
implementation at B&Q, over 300 events have been planned using this
solution since launch, resulting in improved sales, gross margin % and
sell-through of stock. Roll-out to other banners is planned in FY 24/25,
starting with Castorama France and then Castorama Poland
Streamlining operations
· Supply chain transparency - earlier this year Kingfisher
developed a supply chain visibility tool (SVT) to provide our banners with
real-time and end-to-end visibility of products, from receipt at origin ports
all the way to arriving at stores. This transparency over the supply chain
enables our banners to reduce inventory levels and replenishment cycles by
optimising the time between products being ordered and arriving at stores and
distribution centres. Over time, we believe this will result in higher product
availability, lower inventory days, less working capital requirements and
higher profitability. The tool has been implemented in all our markets across
the Group, with live reporting helping our teams to pinpoint issues and
identify resolutions quickly, allowing availability challenges to be addressed
more efficiently
· Forward visibility - SVT is also enabling our banners to provide
forward visibility to our suppliers by sharing our data and allowing
collaborative planning. We are currently sharing data with 45 OEB vendors
representing approximately 30% of OEB sales. So far this has resulted in
substantial reductions in average lead-times and minimum order quantities, and
a reduction in inventory days for the in-scope OEB vendors
· Demand forecasting - Kingfisher also developed a forecasting
algorithm powered by AI for use initially at our French banners, to improve
demand forecast accuracy. Early results are encouraging, showing a significant
improvement in forecast accuracy. In FY 24/25 we aim to embed these new
capabilities into more of our banners
New income streams
· Retail media - we believe there is a significant opportunity to
create a proposition for 3P vendors who want to purchase advertising through
retail media and use data to improve their offering
· During the year we established a Group partnership with CitrusAd,
a market-leading technological solution that Kingfisher will use to manage the
advertising proposition for 3P vendors. To accelerate our plans, in H1 we also
partnered with Unlimitail, a new European retail media joint venture between
Carrefour and Publicis, to provide advertising sales support in France, Poland
and Iberia
· Our retail media operations were launched at Castorama France in
H1, and went live at B&Q in H2, with multiple vendors now advertising via
our e-commerce channels. Other banners will follow suit in FY 24/25. Our
priorities also include launching a retail media proposition for marketplace
sellers
· Over time, we see the potential for retail media revenues to
reach up to 3% of the Group's total e-commerce sales
d) Differentiate and win through own exclusive brands (OEB)
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 and innovative
solutions at affordable prices, with a focus on reducing environmental impact.
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.
FY 23/24 performance highlights
· Total OEB sales of £5.7bn, representing 45% of Group sales (FY
22/23: 45%)
· We consider this a resilient penetration rate considering our
focus on offering more choice through a wider range of local and international
branded products, including from our e-commerce marketplace proposition
· LFL sales of our OEB ranges were down 4.6%, impacted by the
performance of outdoor and 'big-ticket' categories (kitchen, bathroom &
storage), with both categories having a relatively higher weighting towards
OEB products. We saw a resilient performance from OEB ranges within our tools
& hardware and building & joinery categories
· Key five OEBs (GoodHome, Erbauer, Cooke & Lewis, Verve and
Magnusson) contributed 21% of total Group sales (FY 22/23: 20%)
· In FY 23/24, 60% of OEB product sales were Sustainable Home
Products (SHPs) (FY 22/23: 56%) and our target is to reach 70% by FY 25/26.
Please also refer to 'Lead the industry in Responsible Business and energy
efficiency' below for further details on how we are leveraging our OEBs to
drive further SHP growth, while supporting efforts to reduce our scope 3
emissions footprint
· Range review successes - our recent OEB range reviews have landed
well with customers. One of the most successful range refreshes carried out in
the last 12 months was GoodHome baths, delivering sales growth of c.6% YoY
following the launch of the new range. Our refreshed OEB wood fencing ranges
were also successfully implemented in our French banners in the year, with
positive sales results versus the predecessor ranges
· Award-winning OEB - our industry-leading OEB design capabilities
continue to be recognised internationally, with our Cascabel kitchen tap and
Neva decking solutions both winning prestigious Red Dot design awards in the
year
We continue to focus on OEB development with our three strategic pillars in
mind: innovation, affordability and reducing environmental impact. All new
product launches and range reviews stringently address each of these three
pillars
· Innovation - whatever task our customers are aiming to complete,
we seek to make it easier for them. We do this by acquiring a deep
understanding of their needs and frustrations, and filling the gap in the
market today. Our focus on innovation through product development is achieved
by measuring how well the product does the job it is designed to do, and how
the product is simplifying or enhancing the experience for our retail and
trade customers. A recent example is our 'Air Tech' technology featured in the
Erbauer 16oz claw hammer, which reduces shock and vibration from use. Erbauer
is now Kingfisher's number one brand for tools, ahead of several renowned
international brands. Other examples include our GoodHome vinyl flooring
solution with its easy-to-install 'click' installation system, and our
GoodHome 'EasyRoll' wallpaper which only requires water for application,
removing the need for glue. Our recently launched Site workwear product lines
for female trade professionals has been very successful, building on customer
insights to serve a previously unsupported segment of the market
· Affordability - we aim to reach millions of customers by
providing the most affordable solutions in the market. We target our OEB
products to be, on average, 15-30% cheaper than branded products. For example,
our GoodHome durable paints and Erbauer combi drills are both c.30% cheaper
versus their equivalent branded products, and are significantly outpacing them
on sales growth. We achieve this by strengthening the offer in the lowest
selling price quartile and opening price points, and using value engineering
to gain manufacturing efficiencies and economies of scale. For example, during
the year we re-engineered our GoodHome garden furniture range which enabled us
to relocate production from China to Turkey, leading to lower manufacturing
costs and reduced delivery lead-times
· Reducing environmental impact - we are committed to providing
solutions to our customers to help them live more sustainably. We continue to
embed environmental 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. By doing this, we aim to empower customers to make a
sustainable choice without compromising on cost or comfort
- Our Sustainable Home Products (SHPs) aim to either help our
customers reduce the impact of their homes on the environment (such as
water-saving taps or loft insulation) or to reduce the impact on the
environment because of their input materials or how they are manufactured (for
example, FSC-certified timber, peat-free compost or recycled plastic). Through
our OEB team's design and development work, we are focused on driving up
product attributes that meet these requirements. As an example, our new
GoodHome paintbrush handle and roller are manufactured with 100% recycled
plastic, a first in the industry. In H1 we launched Naturéa by GoodHome, our
first paint range containing resins made from renewable raw materials (as
opposed to fossil fuels)
- In FY 23/24, we launched our Green Star product marker programme
at B&Q, Screwfix and Castorama Poland for an initial 8.5k SKUs, with the
aim of making it easier for customers to identify and purchase products that
have a reduced impact on the environment. Our priority in FY 24/25 is to
extend the Green Star marker to a broader population of SKUs, and continue the
roll-out to all our banners
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 and expansion across our banners, range expansion and improved
merchandising, building deeper relationships with trade customers, new
services, loyalty programme optimisation and digital enhancements. We are
aiming to reach more than £1bn of sales at TradePoint in the UK &
Ireland, and double trade sales penetration in France and Poland, over the
medium term.
Screwfix is the UK's number one 'light-trade' retailer. In FY 23/24, the
business continued to expand, opening 46 stores in the UK, five in Ireland and
15 in France. As of 31 January 2024, Screwfix operated 922 stores in the UK
& Ireland, and 20 stores in France where it launched in April 2021 (with
its first store opening in October 2022). In Q3, Screwfix launched as a
pure-play online retailer in six additional European countries. Please refer
to 'Grow by building on our different banners' above for further details.
Through B&Q's trade-focused banner, TradePoint, we have created a
blueprint for our ambitions in 'heavier trade'. In FY 23/24 the business
delivered £834m in sales, outperforming B&Q retail with LFL sales of
+0.7%, representing 22% of B&Q's total sales (FY 22/23: 22%). TradePoint
has a strong plan to drive its 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. The
business is also increasingly focused on growing its business-to-business
(B2B) sales, catering to trade federations, professional housebuilders and
small and medium-sized enterprises, with sales in this area up c.25% YoY.
More broadly, we are leveraging our success and learnings to increase trade
customer penetration across our other retail banners. We recognise the unique
needs of trade customers and have therefore aligned our trade strategy across
six key pillars: stores, range and price, people, services, loyalty and
digital. Progress against these pillars is described below.
Stores
· TradePoint opened 21 new trade counters in FY 23/24, extending
its presence within the B&Q store network to 209 (67% of stores)
· Castorama Poland tested 'CastoPro' in five stores, with dedicated
entrances in three of the stores, providing a dedicated space to bring
together key trade ranges and serve trade customers. The business plans for a
further 10 'CastoPro' areas in FY 24/25
· Launched tests in 37 stores across Castorama France, Brico
Dépôt France, Iberia and Romania to provide a differentiated proposition to
trade customers including dedicated customer service experts. Early results
have been very positive - for example, more than doubling trade sales
penetration in 24 Brico Dépôt France stores. These tests will be expanded to
more stores in FY 24/25, including a roll-out to the entire Brico Dépôt
France network
Range and price
· Leveraging our strength in OEBs to develop and launch
trade-focused products for our banners. In FY 23/24 we launched our Fortress
paint and paint tools ranges, offering a higher durability than traditional
paints as well as high-specification paint accessories. Customer reaction and
sales have been strong to date. We also tailored our Site workwear product
lines to be more suitable for female trade professionals. Our plumbing-focused
OEB Flomasta range continues to perform well in the UK with over 500 SKUs to
support key plumbing and heating engineer needs, with planned expansion into
our other banners in FY 24/25
· Continuing to add trade-specific branded products to our
assortment for trade customers; for example, OX hand tools and Bosch power
tool accessories at TradePoint, in line with customer demand
People
· We believe that dedicated trade colleagues can help us capture a
greater share of trade customer spend, while providing feedback loops to help
optimise our offer. Dedicated TradePoint sales partners have been recruited in
39 stores to date, aiming to build more direct and personalised relationships
with trade customers. Early results have been positive, supporting
TradePoint's uplift in LFL sales in H2 to +3.6% (versus H2 LFL of -0.2% for
B&Q as a whole)
· A similar approach is being taken in certain Brico Dépôt France
and Castorama Poland stores, where we have designated dedicated customer
service experts to engage with trade customers, introduce them to
trade-specific benefits, and encourage sign-ups to their loyalty programme
tests. We have seen positive early results in these 'pilot' stores, resulting
in greater frequency of visits by trade customers and higher basket values. As
noted above, trade sales penetration has more than doubled in 24 Brico Dépôt
France stores where we have piloted this approach. We will extend the roll-out
of this approach to more stores in the UK, France and Poland in FY 24/25,
including all Brico Dépôt France stores
Services
· Tool rental - in December 2023, in partnership with SpeedyHire,
B&Q made tool hire accessible to all its customers nationwide with the
launch of a new online tool hire service. The SpeedyHire concessions in
B&Q stores have closed, with some space reserved as display areas to
promote the new order-to-home service. In France, Castorama France partners
with Loxam at 41 stores to provide trade customers with heavy machinery and
job specific tools, delivered both in-store and nationwide via home delivery.
Following a successful trial, Castorama Poland has expanded the trials of its
CastoRent tool rental service to 26 stores, providing low-cost access and
increasing customer exposure to our Erbauer and MacAllister brands
· Fulfilment - during the year, nationwide crane delivery was
rolled out at Brico Dépôt France with very strong results. Direct-to-site
delivery, next-day delivery and 'timed delivery' slots all continue to be
tested and further explored across the Group, according to trade customer
demand
· Waste management - our responsible waste services in partnership
with AnyJunk and LoveJunk are delivering positive results in the UK
· Payment facilities and financing - payment facilities and
cashflow are key considerations for our trade customers to successfully
operate their businesses. In Brico Dépôt France, a deferred payment trial is
in the process of rolling out alongside the national launch of a trade loyalty
programme 'Special Pros'. Dedicated third-party financial products for trade
and B2B customers are also being explored and deployed in Castorama Poland and
Brico Dépôt Iberia
Loyalty
· We recognise the importance of loyalty programmes to trade
customers, with trials now live in all markets and plans to extend to more
stores in FY 24/25
· TradePoint - loyalty programme continues to be attractive to
trade customers, with active members +6% YoY. The loyalty card is now
available on Apple Wallet for easier scanning and faster checkout
· Castorama France - currently trialling a loyalty programme
similar to TradePoint
· Brico Dépôt France - launched a trade loyalty programme in FY
23/24 in 24 stores with strong results. The programme has now rolled out
nationwide, following a national marketing campaign in February 2024. The
cashback programme gives a 2% discount on purchases
· Castorama Poland - during the year, the 'CastoPro' loyalty
programme was successfully trialled across 18 stores. Early results showed
that these stores outperformed similar sized stores without a loyalty offer.
The loyalty programme was extended to all Castorama Poland stores in February
2024
· Brico Dépôt Iberia - the 'BricoPro' loyalty programme in Brico
Dépôt Iberia continues to grow successfully, with sales to trade customers
up c.180% since launch, and significant sales growth YoY from comparable
customers
· Brico Dépôt Romania - launched cashback trials via trade
loyalty programme
Digital
· Our C&C and online propositions help trade customers plan and
prepare for their projects so that tools and materials are available when and
where they need them
· Screwfix Sprint continues to deliver essential items to trade
customers within one hour, available exclusively through the Screwfix app
· As our loyalty programmes develop, personalisation is a key focus
area, leveraging our expanding data and analytics expertise to bring more
relevant offers and content to known trade customers. Please refer to 'Build a
data-led customer experience' above for further details
· Castorama Poland is planning the launch of a trade loyalty app in
FY 24/25, giving customers access to a virtual 'CastoPro' loyalty card,
displaying their active discount level and spend required to reach the next
discount tier
f) Roll out compact store formats
Our home improvement banners operate over 2,000 stores across eight countries
in Europe. They play an integral role in meeting the demand for fast
fulfilment via e-commerce channels, whether through C&C or delivery, to
where the customer wants it. Compact stores are also playing an increasingly
crucial role in addressing the consumer need for 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.
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.
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 Castorama Poland) to mostly focus on
medium-box stores (2,000 to 6,000 sqm), and 'rightsizing' or repurposing space
within many of our larger format big-box stores (more than 6,000 sqm).
We are making good progress in testing different concepts in different
catchments to unlock the compact store opportunity. We now have 27 active
tests across three markets and five retail banners (B&Q, Screwfix,
Castorama France, Brico Dépôt France and Castorama Poland), with nine
additional test stores opened in FY 23/24. The compact stores are in a variety
of locations including high streets, small retail parks, industrial estates
and dense urban areas.
· High street tests (300-1,000 sqm) - continue to deliver
encouraging learnings and results. We have 14 high street concept stores open
in the UK, France and Poland, including five stores with two or more full
years of trading. B&Q opened two new 'B&Q Local' stores in FY 23/24
for a total of 10, seeing high C&C participation (three to four times
higher than non-compact stores) and growth of customers new to B&Q.
Similar concepts are being tested at Castorama France (three 'Casto' stores)
and Castorama Poland (one 'Express' store). Across all three markets, we
continue to iterate the store tests accounting for local customer needs as we
create an optimum blueprint. In FY 24/25, B&Q will test in towns and
cities outside of London
· Small retail park tests (800-2,000 sqm) - live at Castorama
Poland under the 'Castorama Smart' sub-banner, since June 2021. The format
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. We have a total of six
such stores operating across Poland in a variety of catchments, with one new
'Smart' store opened in FY 23/24 (and one more planned for FY 24/25). The
format continues to be adapted and iterated according to learnings
· Screwfix compact stores - Screwfix continues to test its
ultra-compact format stores ('Screwfix Collect') to enable expansion into more
urban locations. Trials in central London are delivering encouraging results,
giving customers greater convenience and access to the full Screwfix range via
next day C&C. A total of five 'Collect' stores were in operation as of 31
January 2024, with four opened in FY 23/24, and we expect to test more in the
coming year
· Brico Dépôt compact stores - in June 2023, Brico Dépôt France
launched its first compact store in Cahors, France, followed by a further
store opening in H2. The concept allows customers to access the entire core
Brico Dépôt range (c.11k SKUs) in an area of under 1,000 sqm, with a
separate space to allow larger and bulk purchases to be collected. The format
also alleviates various pain points in the customer journey, saving customers
time and effort by removing the need to take large or bulk items from shelves
or navigating aisles with heavily-loaded trolleys. Assuming the format is
validated, Brico Dépôt France is well positioned to penetrate more of the
geographic 'white spaces' that exist in France. Customer reaction has been
positive to date, with a focus in FY 24/25 on optimising the proposition
g) Lead the industry in Responsible Business and energy efficiency
We are committed to leading our industry in responsible business practices and
energy efficiency. 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.
Our priorities are underpinned by our commitment to 'Responsible Business
Fundamentals'. These are the topics and impacts we 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, cybersecurity 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, with key updates noted below.
Colleagues: Becoming a more inclusive company
· Remuneration and support - we continue to closely monitor the
cost of living in each of our markets and, accordingly, put measures in place
to support colleagues in our stores and head offices. During the year we
implemented timely salary increases in each of our markets and responded
swiftly to changes to the National Minimum Wage or local equivalent, helping
Kingfisher remain one of the most competitive employers on retail store
colleague pay. Our focus on optimising colleague reward saw 2023 employee Net
Promoter Scores (eNPS) for reward rise by 12 points, and wellbeing scores
increase by 6 points. We are working towards implementing measures to ensure
even greater pay transparency. A key part of this approach is to adopt EU Pay
Transparency Directive legislation in line with local legislative
considerations
· Colleague engagement - we track colleague engagement through
frequent surveys and listening forums at banner and Group, including through
our 17 Affinity Networks. Our colleague satisfaction scores remain within the
top 5% of worldwide retailers
· Gender representation - we continue to work towards our gender
representation targets of 40% women in management roles and 35% women in
senior leadership roles by FY 25/26. During the year we made significant
progress, reaching 28.6% women in our senior leadership team (FY 22/23: 25.8%)
and 39.6% in management roles (FY 22/23: 38.9%). While we are making good
progress, we continue to strengthen our actions and focus on this area across
the Group. In the UK, our latest Gender Pay Gap report, to be published in
April 2024, shows a reduction in the median hourly pay gap from 1.1% to 0.8%
· Ethnic representation - we have set a target of doubling our
ethnic diversity in the UK for group executive team members and their direct
reports, from 8% to 16% by 2030. In line with the Parker Review's
recommendations (in the UK) for ethnic diversity targets to be set for 2027,
we've set an interim target of 12.5% by 2027
· Colleague learning and development - we continue to invest
significantly in opportunities for colleagues to learn and grow with us.
Having surpassed our previous learning target of providing 5 million hours of
skills for life learning by 2025, we have established a new target: "by 2030,
more than 20,000 colleagues will have completed an apprenticeship, traineeship
or external qualification". During the year, B&Q and Screwfix were both
listed in the Top 100 Apprenticeship Employers in the UK
· Hiring to support growth ambitions - we continue to invest in
talent and capability to support our growth ambitions, recruiting deep
functional expertise in key areas such as trade, e-commerce, marketplace,
data, and technology, including the creation of two in-house engineering
centres, one in Cluj, Romania, and one at our shared services centre in
Krakow, Poland, as well as the creation of a new retail media team in France.
In the context of strong competition for talent in our markets, our attrition
levels, and the time it takes to hire new colleagues remain either in line
with, or better than, retail industry benchmark levels
Planet: Helping to tackle climate change and becoming Forest Positive
Scope 1 and 2 carbon reduction targets
· Our near-term 1.5°C-aligned science-based scope 1 and 2 carbon
reduction target is to reduce emissions from our own operations by 37.8% by FY
25/26, as approved by the Science Based Targets initiative (SBTi) in 2021. We
see this as the first step towards achieving our net-zero target (for our own
operations) by FY 40/41
· We continue to exceed this near-term target, reducing the carbon
footprint from our own operations by 62.0% since FY 16/17 (FY 22/23: 51.0%)
· A key driver for the sustained reductions in our operational
emissions is the decarbonisation of our logistics network, and switching to
more efficient vehicles across our delivery fleets (e.g., Screwfix switching
from diesel to hydrotreated vegetable oil, and Castorama France switching from
diesel to biomethane)
· We have also significantly reduced emissions from our property
portfolio through the adoption of energy efficiency measures, including
investing in on-site renewable energy and replacing gas and fossil fuel-based
heating systems in our stores (e.g., the installation of air source heat pumps
at Screwfix stores)
Scope 3 carbon reduction targets
· Our scope 3 science-based 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. Our efforts are
focused on raw materials used in the manufacturing of our products, emissions
from the manufacturing process, and emissions from customer use of our
products
· In FY 23/24, we reduced the intensity of our scope 3 emissions
from the supply chain and customer use of products by 41.6% since FY 17/18,
exceeding our 2025 target. This reduction in carbon emissions has been driven
through a change in our sales mix, the decarbonisation of energy grids within
our banner countries, and our continued work on vendor and product
decarbonisation
· Earlier in the year, we became a founding member of a new
collaborative taskforce, initiated by EDRA/GHIN (the global trade bodies for
home improvement retailers), to help the sector reduce its scope 3 emissions
Forest Positive
· Kingfisher has a strong heritage in sustainable forestry and the
responsible sourcing of wood and paper. In FY 23/24, 97% of the wood and paper
used in our products was responsibly sourced (FY 22/23: 94%), including 100%
of catalogue paper (FY 22/23: 100%)
· We therefore remain on track to achieve our target of 100% by FY
25/26
· As a founding member of the Forest Allies initiative (in 2021),
we have continued our partnership with the Rainforest Alliance, investing in
six forest projects in key tropical sourcing regions. These cover 190,000
hectares of community-managed forests and contribute towards the protection of
more than 2.5 million hectares of protected areas
· We also continue to invest in local forest partnerships,
including B&Q and Screwfix extending their work with The Woodland Trust to
restore, create and protect native woodland and forests in the UK
Customers: Helping to make greener, healthier homes affordable
· In FY 23/24, £6.4bn of sales, representing 49% of Group sales
(FY 22/23: 47%), were from Sustainable Home Products (SHPs). This has more
than doubled since we established the programme in FY 11/12, and our target is
to reach 60% by FY 25/26
· Our SHPs include our OEB as well as national and international
branded products. Through our OEB portfolio, we are able to drive progress
against our SHP target and embed environmental considerations through all
stages of our product development process
· For example, we phased out peat-based compost at B&Q
(Kingfisher's biggest seller of compost by volume) and are now working to
remove peat from all our OEB bagged-compost across the Group. We have also
removed solvents from more paint lines - e.g., through the launch of Naturéa,
Kingfisher's first bio-based paint
· An important subset of our SHPs are our energy and water-saving
products. In FY 23/24, these represented 10% of Group sales (FY 22/23: 10%).
We see considerable longer-term potential across all our markets as the 'green
homes' agenda accelerates, and as our customers continue to look for
opportunities to reduce the impact of their homes on the environment
· We are developing opportunities to further increase our
engagement with customers in this area. Examples include launching free
energy-saving diagnostic tools at B&Q and Brico Dépôt France, and
expanding our range of OEB energy-saving products to support customers in
improving energy efficiency at home and to save money in the process
· During the year we launched our Green Star product marker
programme at B&Q, Screwfix and Castorama Poland for an initial 8.5k SKUs,
with the aim of making it easier for customers to identify and purchase
products that have a reduced impact on the environment. Green Star marked
products are selected from our SHP range, with a stand-out environmental
feature or benefit that can be easily explained to and understood by
customers. The claim is then verified by relevant external third-parties. Our
priority in FY 24/25 is to extend the Green Star marker to a broader
population of SKUs, and continue the roll-out to all our banners
Communities: Fighting to fix bad housing
· We surpassed our FY 25/26 target of reaching 2 million people
whose housing needs are greatest, through our charitable partnerships and
banner Foundations. We have reached a total of 3.2 million people since FY
16/17 through our community projects
· Our banner 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
· This year, the Screwfix Foundation celebrated its 10(th)
anniversary, raising over £10m since launch and with nearly 2,200
organisations receiving a donation
· The Brico Dépôt Romania Foundation's 'Hope build' project
(alongside Habitat for Humanity) received an award in the 2023 Romanian CSR
Awards Gala, and B&Q's 'Raise the Roof' campaign was awarded 'Challenge
Event of the Year' at the 2023 Business Charity Awards in the UK
· During the year we supported global relief efforts across the
world, including providing financial donations in response to natural
disasters in Turkey, Syria, Libya and Morocco
Governance and Reporting
Our Responsible Business Committee (RBC) supports and oversees the delivery of
Kingfisher's Responsible Business strategy. This includes monitoring
performance against the Responsible Business priorities. Our Group Climate
Committee meets quarterly to monitor the Company's approach to meeting its
climate commitments and assessing climate-related risks and opportunities. For
more information on Responsible Business governance, please refer to our
2023/24 Annual Report.
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 a 25% weighting on ESG measures. Kingfisher also 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.
In June 2023, we published our 2022/23 Responsible Business Report, detailing
the progress we made across the four priorities of our Responsible Business
strategy. We also published our inaugural Responsible Business Databook which
captures current and historical data, as well as performance against our
priorities. We report on 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). Our FY 23/24 Responsible
Business Report will be published in Q2 24/25.
We continue to rank highly in external benchmarks and indices. Highlights
include MSCI ('AAA' score), Sustainalytics (second out of 42 in home
improvement retail), FTSE4Good (score of 4.3 out of 5), CDP Climate Change
('A-' leadership score) and Workforce Disclosure Initiative (88% score,
compared to average consumer discretionary score of 60%).
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
have adopted a 'done is better than perfect' mindset to move faster and with
more agility, given the rapidly changing environment in which we do business.
And we continue to focus on becoming leaner and more productive, as well as
lowering our same-store inventories.
Human
· We are continuing to listen to our colleagues and measure their
engagement across the Group, through formal and informal mechanisms. These
include our 17 Affinity Networks and the Kingfisher Colleague Forum
· Every Kingfisher colleague was asked to share their feedback via
a colleague engagement survey in the summer of 2023. We heard from 87% of
colleagues (up 4% YoY), with colleagues sharing 280,000 comments. Our Employee
Net Promoter Score (eNPS) of 57 improved by three points YoY. All banners
completed at least two colleague surveys last year, enabling better visibility
and management of engagement levels
· Good progress is being made on delivering on our inclusion plans.
During the year we launched a Group-wide allyship campaign, called 'Together.
Stronger'. The campaign sets clear minimum standards and expectations on
inclusive behaviours and educates on the importance of everyday allyship.
Colleagues complete mandatory training on non-inclusive behaviours and how to
tackle them, and have been invited to make personal commitments to being a
better ally
· During the year, Kingfisher's 'Diversity in Tech Network' was
recognised at the Women in Tech Employer Awards, winning the Best Employer
Network category, and at the European Diversity Awards as Outstanding Network
of the Year. Our LGBTQ+ Affinity Network was also shortlisted in the Diva
Awards, the Bank of London Rainbow Honours, and the European Diversity Awards
in recognition of its impact
Agile
· One of the benefits of 'Powered by Kingfisher' is that our Group
can easily leverage learnings across the business to ensure our banners can
move with speed and agility. For example, our 'Centres of Excellence' enable
technologies, resources and best practices to be quickly implemented
elsewhere, such as our marketplace or trade initiatives. Kingfisher has
'Centres of Excellence' in supply chain, trade, compact stores, customer
services, data, technology, and e-commerce & marketplace
· Across our technology infrastructure, we are leveraging strategic
partnerships (such as with Google, Amazon Web Services and Microsoft Azure for
cloud data) to enable a seamless migration from traditional data centres to a
multi-cloud approach. This has led to enhanced speed, performance and
resilience of our technology systems
· During the year we bolstered our internal engineering
capabilities, adding software engineers in our Krakow (Poland) centre and
opening our first engineering centre in Cluj (Romania), allowing us to be more
agile in responding to customer demands
Lean - cost reduction and productivity
Multi-year structural cost reduction programme
We continue to make strong progress in lowering our cost base across multiple
areas of the business.
The net savings from these programmes continue to partially offset the costs
of inflation, expansion and space changes, and the investment requirements of
our business over the medium term. They are also key to unlocking targeted
profitability improvements in France. In FY 23/24, we made progress in several
areas:
· Supply and logistics - Kingfisher's supply and logistics teams
continue to optimise our distribution centre and logistics networks. In
France, Castorama and Brico Dépôt have reduced distribution centre space by
28% over the last four years in line with changes to their supply routes to
market for near-sourced products
· GNFR* optimisation - category managers with Group-wide
responsibilities and local procurement teams continue to optimise c.£2.5bn of
GNFR spend through around 230 cost reduction projects. During the year,
B&Q changed its customer service call centre provider and adopted call
centre automation in certain instances to lower costs. The Group also realised
lower IT hosting costs through our strategic partnership with Google, and
lower SAP support costs through switching third-party support providers. Brico
Dépôt France realised cost savings from decommissioning legacy IT operating
systems
· Overheads - savings were realised across Group and banner head
offices, including through the expanded use of our shared service centre (SSC)
in Krakow, Poland. During FY 23/24, our SSC expanded its software engineering
and data capabilities, facilitating a lower level of reliance on third-party
contractors
· Property - excluding Screwfix, the Group completed 17 lease
renewals and renegotiations in FY 23/24, with an average net rent reduction of
19% alongside improved lease terms. In addition, our rightsized big-box stores
continue to deliver positive results. We have completed nine rightsizings over
the last three years, including seven at B&Q and two at Castorama France.
These completed rightsizings saw an average space reduction of c.30%, which in
general was taken over by grocery 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%. Our plan is to rightsize up to 20 more B&Q stores over the medium to
longer term, and accelerate rightsizings at Castorama France. Please refer to
'France performance and profitability plan' in Section 3 for further details
Productivity
In addition to our more structural cost reduction programmes, we are also
focused on raising productivity levels - i.e., adapting and improving existing
processes and workflows to deliver greater cost efficiency. Examples include:
· Store productivity - during the year we deployed various
initiatives across our banners to reduce stock shrinkage, including
strengthening entrance/exit security, product tagging and the secure storage
of high-value items
· Labour productivity - we are continuously optimising store
operating models through the improvement of operating procedures and greater
use of technology. Across all our banners we are redesigning processes and
enhancing systems to improve the time taken to complete tasks such as picking,
collection, and replenishment. This includes time and motion optimisation of
C&C and home delivery order preparation. We have implemented formal store
staffing templates to reduce management time spent on managing staffing needs.
Additionally, we are leveraging improved benchmarking and forecasting to
support more flexible workforce planning
· Self-checkout terminals - we have seen increased customer
adoption of self-checkout terminals across B&Q, Castorama France and
Castorama Poland. This has enabled colleagues to be redeployed to other areas
of our stores, including picking for e-commerce orders. Self-checkout
terminals are currently being piloted in Brico Dépôt France and Iberia
· Supply and logistics - at Screwfix, significant productivity
improvements are being realised through new automated processes at our
flagship logistics site in Trentham. Over 25% of weekly volumes in Trentham is
now processed using automated technology, resulting in a 150% pick-rate
improvement compared to standard processes, and thereby generating meaningful
cost savings. At Castorama Poland, we improved truck utilisation by 16%
through using equipment that enabled us to better load trucks, saving on
transport costs and removing the equivalent of 3,500 road journeys
· Overheads - Our SSC in Krakow, Poland, continues to focus on
reducing costs through greater use of automation - for example, using bots to
analyse and chase overdue accounts receivables
Lean - inventories
Structurally reducing our inventory levels and improving inventory turn is a
major priority over the medium term. To unlock efficiencies in our supply
chain and inventory management, all our banners are deploying actions to
structurally reduce same-store inventory. We are doing this by leveraging data
to improve our planning and forecasting, optimising our replenishment systems
(e.g., re-adjusting for shorter supplier lead-times), and developing stronger
ranging principles.
For example, as described in 'Build a data-led customer experience', earlier
this year Kingfisher developed a supply chain visibility tool (SVT) to provide
our banners with real-time and end-to-end visibility of products, from receipt
at origin ports all the way to arriving at stores. This transparency over the
supply chain is enabling our banners to reduce inventory levels and
replenishment cycles by optimising the time between products being ordered and
arriving at stores and distribution centres. Over time, we believe this will
result in higher product availability, lower inventory days, less working
capital requirements and higher profitability.
More recently we have implemented a tactical action plan on product supply and
availability in light of the current crisis in the Red Sea. We are working
with our freight providers to secure shipping container capacity. We have
successfully shipped our OEB outdoor stock according to our original plan and,
to date, these shipments represent c.75% of our full 'buy' for the season. We
have also protected ongoing supply through pulling forward product orders
where appropriate, and quickly reflecting more accurate shipping lead-times in
replenishment systems.
FY 23/24 performance summary
· Net inventory - total net inventory decreased by 4% (£132m) to
£2,914m (FY 22/23: £3,046m in constant currency; £3,070m in reported
rates). This was driven by lower purchasing, a reduction in seasonal and
'buffer' stock, product mix and strategic reduction initiatives; partially
offset by product cost inflation and new stores
· Same-store inventory - as of 31 January 2024, same-store net
inventory* was 5% (£160m) lower YoY in constant currency
· Inventory in units (volume) - as of 31 January 2024, inventory in
units (volume) was down 4% YoY
· Net inventory days - increased by 1% YoY
· Product availability - overall and 'best seller' product
availability significantly improved YoY, both up over 2% to above 96%
Medium-term financial and capital allocation priorities
Medium-term financial priorities
Building on our industry's attractive growth prospects, and supported by the
application of Kingfisher's strategic priorities, the Group's medium-term
financial and capital allocation priorities are as follows:
· 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.£450m in FY 25/26, followed by >£500m per
annum from FY 26/27, 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% of total sales per annum, focused on
delivering against attractive organic growth opportunities.
To maintain a solid investment grade credit rating, our maximum net debt to
EBITDA 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 2024 includes an undrawn revolving credit
facility of £550m and cash of £353m (net of bank overdrafts).
Our target ordinary dividend cover range is 2.25 to 2.75 times, based on
adjusted basic earnings per share. We may move outside of this target range,
temporarily, from time to time. Overall, our aim is 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 23/24
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 23/24, which is
in line with the prior year (FY 22/23: 12.40p) and equates to a dividend cover
of 1.8 times.
The final dividend is subject to shareholder approval at the Annual General
Meeting on 20 June 2024,
and if approved will be paid on 25 June 2024 to shareholders on the register
at close of business on 17 May 2024. The shares will go ex-dividend on 16 May
2024.
Share buyback programme
In line with our capital allocation policy described above, in September 2023
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 2024, we had repurchased c.£50m worth of shares
under this programme and expect the second tranche of the programme to begin
soon.
Including shares bought back under the previous £300m programme, we
repurchased c.£160m worth of shares in FY 23/24.
Section 5: Technical guidance for FY 24/25
Please refer to Section 8 for further details regarding forward-looking
statements.
Income statement
· Space
- Sales impact of c.+1.5% from net space growth, mainly from
Screwfix UK & Ireland and Castorama Poland
· New businesses
- 'Other'((1)) retail losses of c.£30m (FY 23/24: £30m)
· Depreciation and amortisation
- Anticipate c.£680m (FY 23/24: £641m)
· Central costs
- Anticipate c.£65m (FY 23/24: £60m)
· Share of JV interest and tax
- Anticipate c.£20m (FY 23/24: £16m)
· Net finance costs
- Anticipate c.£115m (FY 23/24: £105m)
· Adjusted PBT
- Full year adjusted PBT of c.£490m to £550m((2))
· Tax rate
- Group adjusted effective tax rate* of c.27% (FY 23/24: 27%)
Cash flow
· Capital expenditure
- Targeting gross capex of c.£360m (FY 23/24: £363m; c.2.8% of
total sales)
· Free cash flow
- Anticipate c.£350m to £410m for the year (FY 23/24: £514m)
· Share buybacks
- Continuation of current £300m share buyback programme (c.£50m
completed to date)
· Dividends
- Dividend policy target cover range of 2.25 to 2.75 times, based on
adjusted basic earnings per share. We may move outside of this target range,
temporarily, from time to time
((1)) 'Other' consists of the consolidated results of Screwfix International,
NeedHelp, and results from franchise and wholesale agreements, recorded within
the 'Other International' division.
((2)) Guidance assumes current exchange rates.
Section 6: Financial review
A summary of the reported financial results for the 12 months ended 31 January
2024 is set out below. To be read in conjunction with the condensed financial
statements included in part 2 of this announcement.
Financial summary % Total Change % Total Change % LFL Change
2023/24 2022/23 Reported Constant currency Constant currency
Sales £12,980m £13,059m (0.6)% (1.8)% (3.1)%
Gross profit £4,776m £4,795m (0.4)% (1.6)%
Gross margin % 36.8% 36.7% 10bps 10bps
Operating profit £580m £723m (20.0)%
Statutory pre-tax profit (PBT) £475m £611m (22.3)%
Statutory post-tax profit £345m £471m (26.7)%
Statutory basic EPS 18.2p 23.8p (23.5)%
Net increase/(decrease) in cash((1)) £84m £(555)m n/a
Total dividend 12.40p 12.40p -
Adjusted metrics
Retail profit £749m £923m (18.9)% (19.5)%
Retail profit margin % 5.8% 7.1% (130)bps (130)bps
Adjusted pre-tax profit (PBT) £568m £758m (25.1)%
Adjusted pre-tax profit margin %* 4.4% 5.8% (140)bps
Adjusted post-tax profit £415m £589m (29.2)%
Adjusted basic EPS 21.9p 29.7p (26.4)%
Free cash flow £514m £(40)m n/a
Net debt((2)) £(2,116)m £(2,274)m n/a
((1)) Net increase/(decrease) in cash and cash equivalents and bank
overdrafts.
((2)) Net debt includes £2,367m of lease liabilities under IFRS 16 in FY
23/24 (FY 22/23: £2,444m).
Total sales decreased by 1.8% on a constant currency basis, to £12,980m,
reflecting a resilient performance in core categories, particularly in the UK
& Ireland, and the adverse impact of weaker 'big-ticket' sales in the
latter part of the year and unseasonal weather on seasonal category sales. By
geography, a positive sales performance in the UK & Ireland was offset by
lower sales in France, where the trading environment was impacted by low
consumer confidence, particularly in the second half of the year. Sales were
also lower in Poland, Iberia and Romania, where we faced tough comparatives
and a weak consumer environment. On a reported basis, which includes the
impact of exchange rates, total sales decreased by 0.6%.
LFL sales of -3.1% excludes a +1.3% sales impact from a net increase in space,
driven by Screwfix store openings in the UK & Ireland and Castorama in
Poland, and the acquisition of assets of Connect Distribution Services Limited
(renamed Screwfix Spares). During the year, we opened 76 new stores (including
49 stores in the UK, five in Ireland, 17 in France including 15 Screwfix
stores, and five in Poland). We closed one Screwfix store and eight grocery
concession stores in the UK, and one Brico Dépôt store in Romania.
Gross margin % increased by 10 basis points on a constant currency and
reported basis, reflecting effective management of inflation and supplier
negotiations, partially offset by higher customer participation in promotional
activity in France and Poland. In H2, gross margin % increased on a constant
currency basis by 60 basis points. Group gross profit decreased by 1.6% in
constant currency.
In constant currency, retail profit decreased by 19.5%, largely reflecting
lower gross profits in France and Poland, and higher operating costs in the UK
& Ireland and Poland. On a reported basis, retail profit decreased by
18.9%. Operating costs increased by 2.7% on a constant currency basis, largely
reflecting cost inflation, including YoY increases in pay rates and energy
costs, as expected, as well as higher technology spend, higher costs
associated with space growth and new store openings, and charges related to
ineffective foreign exchange hedges in H1. The increase in operating costs was
partially offset through flexing our staffing levels and variable costs, and
structural savings achieved by our cost reduction programme. In H2, our
banners in France and Poland strengthened their actions on cost management,
resulting in operating costs being limited to an increase of 1.3% YoY. The
Group's retail profit margin % decreased by 130 basis points on a constant
currency basis to 5.8% (FY 22/23: 7.1%, at reported rates). In H2, retail
profit margin % decreased on a constant currency basis by 70 basis points to
5.2%.
Adjusted pre-tax profit decreased by 25.1% to £568m (FY 22/23: £758m),
reflecting lower retail profit, higher central costs (including the impact of
insurance claim deductibles in the UK & Ireland and Poland) and higher
share of JV interest and tax (reflecting accounting under high inflation and
related higher interest rates in our joint venture Koçtaş), partially offset
by lower net finance costs. Adjusted pre-tax profit margin % decreased by 140
basis points to 4.4% (FY 22/23: 5.8%).
Statutory pre-tax profit decreased by 22.3% to £475m (FY 22/23: £611m). This
reflects lower operating profit, including the impacts of impairments (see
adjusting items below).
A reconciliation from the adjusted basis to the statutory basis for pre-tax
profit is set out below:
2023/24 2022/23 Increase/ (decrease)
£m £m
Retail profit (constant currency) 749 930 (19.5)%
Impact of exchange rates - (7) n/a
Retail profit (reported) 749 923 (18.9)%
Central costs (60) (49) (22.9)%
Share of interest and tax of joint ventures & associates (16) (4) n/a
Net finance costs (105) (112) +6.1%
Adjusted pre-tax profit 568 758 (25.1)%
Adjusting items before tax (93) (147) n/a
Statutory pre-tax profit 475 611 (22.3)%
Net finance costs of £105m (FY 22/23: £112m) consist principally of interest
on IFRS 16 lease liabilities. The YoY decrease was largely due to higher
interest income on cash deposits.
Adjusting items after tax were a total charge of £70m (FY 22/23: charge of
£118m), as detailed below:
2023/24 2022/23
£m £m
Gain/(charge) Gain/(charge)
Net store asset impairment charges (76) (139)
Operating model restructuring (11) -
Release of France and other restructuring provisions - 3
NeedHelp goodwill impairment (8) -
Romania goodwill impairment - (16)
Release of Castorama Russia disposal warranty liability - 4
Profit on disposal of Crealfi associate investment 2 -
Profit on exit of properties - 1
Adjusting items before tax (93) (147)
Prior year and other adjusting tax items 23 29
Adjusting items after tax (70) (118)
In consideration of our FY 23/24 performance, we have revised future
projections for a number of stores across the Group's portfolio. This has
resulted in the recognition of £76m of net store impairment charges in the
year. Impairment charges of £104m have been recorded principally in France,
Romania and the UK, partially offset by impairment reversals of £28m
principally in the UK. During the year, the Group commenced formal
consultations with employee representatives regarding a proposed restructuring
of the Group technology operating model. Charges of £11m have been recorded,
primarily related to this programme. The total cost of the programme is
expected to reach c.£15m by FY 24/25. An impairment charge of £8m has been
recorded relating to the goodwill originally recorded on the acquisition of
NeedHelp in FY 20/21, principally driven by revised financial projections. On
30 June 2023, the Group completed the disposal of its 49% interest in its
French associate investment Crealfi S.A., resulting in a gain on disposal of
£2m.
Prior year and other adjusting tax items relate principally to deferred tax
credits recorded in respect of the impairment and restructuring expenses noted
above, movements in prior year provisions to reflect a reassessment of
expected outcomes, agreed positions with tax authorities and items that have
time-expired. Please refer to note 6 of the condensed financial statements.
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 27% (FY 22/23: 22%). The adjusted ETR is higher than the prior
year rate primarily due to the increase in the UK statutory tax rate which
took effect on 1 April 2023. Other factors include the impact of a lower share
of Group profit from Poland (statutory tax rate of 19%), and increased
losses in territories in which tax credits are not recognised.
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 27%.
Pre-tax profit Pre-tax profit
£m Tax 2023/24 £m Tax 2022/23
£m % £m %
Adjusted effective tax rate 568 (153) 27% 758 (169) 22%
Adjusting items (93) 23 (147) 29
Statutory effective tax rate 475 (130) 27% 611 (140) 23%
In FY 21/22, Kingfisher paid £64m (including interest) to HM Revenue &
Customs in relation to the European Commission's 2019 state aid decision
concerning the UK's controlled foreign company tax rules. The General Court of
the European Union dismissed several of the appeals in June 2022 and the
decision is now pending with the European Court of Justice. The Group
continues to recognise the amounts paid, together with a further £4m of
accrued repayment interest, as a non-current tax asset, based on its
assessment that its appeal will ultimately be successful. Please refer to note
12 of the condensed financial statements.
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
2024/25 2023/24
UK 25% 24%
France 26% 26%
Poland 19% 19%
Adjusted basic earnings per share decreased by 26.4% to 21.9p (FY 22/23:
29.7p), which excludes the impact of adjusting items. Basic earnings per share
decreased by 23.5% to 18.2p (FY 22/23: 23.8p).
2023/24 2022/23
Earnings((1)) EPS Earnings((1)) EPS
£m pence £m pence
Adjusted basic earnings per share 415 21.9 589 29.7
Adjusting items before tax (93) (4.9) (147) (7.4)
Prior year and other adjusting tax items 23 1.2 29 1.5
Basic earnings per share 345 18.2 471 23.8
((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 22/23 final
dividend: 8.60p). Taken alongside the interim dividend already paid of 3.80p,
this results in a proposed total dividend per share of 12.40p in respect of FY
23/24 (FY 22/23: 12.40p). The final dividend is subject to shareholder
approval at the Annual General Meeting on 20 June 2024, and if approved will
be paid on 25 June 2024 to shareholders on the register at close of business
on 17 May 2024. The shares will go ex-dividend on 16 May 2024. A dividend
reinvestment plan (DRIP) is available to shareholders who would prefer to
invest their dividends in the Company's shares. The last date for receipt of
DRIP elections is 4 June 2024.
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 or refinancing of debt, and identifying an
appropriate amount of headroom to provide a reserve against unexpected
outflows and/or 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 2024, the Group had £2,116m (FY 22/23: £2,274m) of net debt
on its balance sheet including £2,367m (FY 22/23: £2,444m) of total lease
liabilities.
The ratio of the Group's net debt to EBITDA was 1.6 times as of 31 January
2024 (1.6 times as of 31 January 2023). 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. Please refer to
'Medium-term financial and capital allocation priorities' in Section 4 for
further details.
Net debt to EBITDA is set out below:
2023/24 2022/23
£m £m
Retail profit 749 923
Central costs (60) (49)
Depreciation and amortisation 641 582
EBITDA 1,330 1,456
Net debt 2,116 2,274
Net debt to EBITDA 1.6 1.6
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, of which c.£50m expires in May 2025 and c.£500m
expires in May 2026. As of 31 January 2024, this RCF was undrawn.
Term loans
In FY 22/23, the Group entered into two 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. In FY 23/24, the two
term loans were extended to June 2025 and January 2026 respectively.
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
2024, Kingfisher was compliant with this requirement.
Total liquidity
As of 31 January 2024, the Group had access to over £900m in total liquidity,
including cash and cash equivalents of £353m (net of bank overdrafts) and
access to a £550m RCF.
Free cash flow
A reconciliation of free cash flow is set out below:
2023/24 2022/23
£m £m
Operating profit 580 723
Adjusting items 93 147
Operating profit (before adjusting items) 673 870
Other non-cash items((1)) 673 612
Change in working capital 118 (469)
Pensions and provisions (5) (20)
Net rent paid (474) (454)
Operating cash flow 985 539
Net interest received/(paid) 9 -
Tax paid (117) (130)
Gross capital expenditure (363) (449)
Free cash flow 514 (40)
Ordinary dividends paid (237) (246)
Share buybacks (160) (337)
Share purchase for employee incentive schemes (24) (9)
Disposal of Castorama Russia - 8
French tax authority payment - (34)
Disposal of Crealfi S.A. and acquisition of assets of Connect Distribution 6 -
Services Limited
Disposal of assets and other((2)) (15) 4
Net cash flow* 84 (654)
Opening net debt (2,274) (1,572)
Movements in lease liabilities 71 (41)
Other movement including foreign exchange 3 (7)
Closing net debt (2,116) (2,274)
((1)) Includes depreciation and amortisation, share-based compensation charge
and pension operating cost.
((2)) Includes adjusting cash flow items (principally comprising restructuring
costs), partially offset by proceeds from the issue of new shares, dividends
from joint ventures and associates, and disposal of assets.
Operating profit (before adjusting items) was £197m lower than last year,
reflecting lower retail profit, higher central costs and higher share of JV
interest and tax. The working capital inflow of £118m was primarily driven by
a decrease in net inventory of £132m, reflecting lower purchasing, a
reduction in seasonal and 'buffer' stock, product mix and strategic reduction
initiatives; partially offset by product cost inflation and new stores. Due to
more normalised purchasing patterns compared to prior years, the movement in
payables was broadly stable, decreasing by £8m. Receivables increased by
£6m.
Gross capital expenditure was £363m, decreasing by 19% (FY 22/23: £449m). Of
this expenditure, 35% was invested in refreshing, maintaining and adapting
existing stores (including renewable energy initiatives), 18% on new stores,
34% on technology and digital development, 7% on range reviews and 6% on other
areas including supply chain investment.
Overall, free cash flow for the year was £514m (FY 22/23: £(40)m). Net debt
as of 31 January 2024 (including IFRS 16 lease liabilities) was £2,116m (FY
22/23: £2,274m).
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:
2023/24 2022/23
£m £m
Free cash flow 514 (40)
Ordinary dividends paid (237) (246)
Share buybacks (160) (337)
Share purchase for employee incentive schemes (24) (9)
Disposal of Castorama Russia - 8
French tax authority payment - (34)
Disposal of Crealfi S.A. and acquisition of assets of Connect Distribution 6 -
Services Limited
Disposal of assets and other((1)) (15) 4
Net cash flow 84 (654)
Issue of fixed term debt - 99
Net increase/(decrease) in cash and cash equivalents 84 (555)
and bank overdrafts
((1)) Includes adjusting cash flow items (principally comprising restructuring
costs), partially offset by proceeds from the issue of new shares, dividends
from joint ventures and associates, and disposal of assets.
Return on capital employed (ROCE*)
In FY 23/24, Kingfisher's post-tax ROCE was 7.8% (FY 22/23: 10.9%). The
decrease was driven by lower profits in all geographic divisions. Kingfisher's
weighted average cost of capital (WACC) was 8.8% (FY 22/23: 9.3%). ROCE by
geographic division is analysed below:
Proportion of Group sales Capital employed (CE) £bn Proportion of Group CE
Sales ROCE ROCE
£bn 2023/24 2022/23
UK & Ireland 6.4 49.2% 2.9 45.4% 14.5% 16.3%
France 4.2 32.7% 1.7 27.0% 5.9% 8.4%
Other International 2.4 18.1% 1.4 22.3% 3.9% 9.1%
Central 0.4 5.3%
Total 13.0 6.4 7.8% 10.9%
Property
Kingfisher owns a significant property portfolio, the majority of which is
used for trading purposes. A formal valuation of the portfolio was undertaken
by external professional valuers in October 2023. Based on this exercise, on a
sale and leaseback basis with Kingfisher in occupancy, the value of the
property portfolio was £2.7bn (FY 22/23: £2.8bn). This is compared to a net
book value of £2.2bn (FY 22/23: £2.2bn) recorded in the financial statements
(including investment property and property included within assets held for
sale). Balance sheet values were frozen as of 1 February 2004, on transition
to IFRS.
2023/24 2023/24 Yields 2022/23 2022/23 Yields
£bn £bn
France 1.3 8.6% 1.4 8.1%
UK 0.5 7.5% 0.5 7.2%
Poland 0.7 8.3% 0.7 8.0%
Other 0.2 n/a 0.2 n/a
Total 2.7 2.8
Pensions
As of 31 January 2024, the Group had a net surplus of £99m (FY 22/23: £137m
net surplus) in relation to defined benefit pension arrangements, of which a
£212m surplus (FY 22/23: £251m surplus) was in relation to the UK scheme.
The net surplus has reduced primarily due to the UK scheme, where asset losses
were greater than the reduction in the accounting liability; the latter
arising mainly from a higher discount rate (net of inflation). As part of the
funding valuation exercise completed in the prior year, the Trustee and
Kingfisher agreed to cease annual employer contributions 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. Please refer to
note 9 of the condensed financial statements.
Section 7: 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 6) and note 7 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 6) 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 an indication of the Group's
ongoing rate of tax.
Adjusted pre-tax profit (PBT) Profit before taxation A reconciliation of adjusted PBT is set out in the Financial Review (Section Adjusted PBT is used to report the performance of the business at a Group
6) 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 (PBT) margin % No direct equivalent Refer to definition Adjusted PBT is used to report the performance of the business at a Group
level and is separately defined. Adjusted PBT margin % represents adjusted PBT
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 6) and note 7 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.
Core and 'big-ticket' category sales(±) No direct equivalent Not applicable Core and 'big-ticket' category sales include the sales from non-seasonal
products across all our categories, including 'big ticket' sales (i.e.,
kitchen, bathroom & storage). It is used as a measure of our non-seasonal
related performance, which is the majority of Group sales.
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.
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 No direct equivalent Refer to definition First-party e-commerce sales are total first-party sales (excluding VAT)
e-commerce sales 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 No direct equivalent Refer to definition Total e-commerce sales are first-party e-commerce sales plus marketplace gross
e-commerce sales 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 6) 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
6) 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,
year-on-year sales growth for stores that have been open for more than one
year. It is a measure to reflect the Group's performance on a comparable
basis.
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 % represents marketplace gross sales as a percentage
of 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 11 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
6) and in note 11 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 6) 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,
year-on-year change in net inventory before the impact of store openings and
closures. It is a measure to reflect the Group's inventory management on a
comparable basis.
Seasonal category sales(±) No direct equivalent Refer to definition Seasonal category sales include the sales from certain products within our
outdoor, electricals, plumbing, heating & cooling (EPHC) and surfaces
& décor categories. It is used as a measure of the performance of our
sales that are subject to the season we are in, or prevailing weather
conditions.
(±) Indicates the inclusion of new APMs during FY 23/24. The new APMs in the
table above have been introduced to track the performance of our core and
'big-ticket' and seasonal category sales.
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 took the decision to suspend the communication of 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). In November 2023, we restarted the communication of monthly
sales figures to both associations, including the retrospective resubmission
of September and October 2023 sales data.
'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 and wholesale 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 8: 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 2024. 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
any other applicable jurisdiction).
Certain information contained in this announcement may constitute
"forward-looking statements" (including within the meaning of the safe harbour
provisions of the United States Private Securities Litigation Reform Act of
1995), which can be identified by the use of terms such as "may", "will",
"would", "could", "should", "expect", "anticipate", "project", "estimate",
"intend", "continue", "target", "plan", "goal", "aim", forecast, or "believe"
(or the negatives thereof) or other variations thereon or comparable
terminology. These forward-looking statements are based on currently available
information and our current assumptions, expectations and projections about
future events. These forward-looking statements include all matters that are
not historical facts and include statements which look forward in time or
statements regarding the Company's intentions, beliefs or current expectations
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
of the housing and home improvement markets, share repurchases and dividends,
capital expenditure and capital allocation, liquidity, prospects, growth and
strategies, litigation or other proceedings to which we are subject, acts of
war or terrorism worldwide, work stoppages, slowdowns or strikes, public
health crises, outbreaks of contagious disease, environmental disruption or
political volatility. By their nature, forward-looking statements are not
guarantees of future performance and are subject to future events, risks and
uncertainties - many 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.
The forward-looking statements contained in this announcement speak only as of
the date of this announcement and the Company does not undertake any
obligation to update or revise any forward-looking statement to reflect any
new information, change in circumstances, or change in the Company's
expectations to reflect events or circumstances after the date of this
announcement or to reflect the occurrence of unanticipated events.
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