REG - Kingfisher PLC - Half Year Results - (Part 1 of 2)
20/09/2022 07:00
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RNS Number : 9281Z Kingfisher PLC 20 September 2022
Half year results for the six months ended 31 July 2022 (unaudited)
Financial summary % Total Change % Total Change % LFL* Change
2022/23 2021/22 Reported Constant currency* Constant currency
Sales £6,809m £7,101m (4.1)% (2.8)% (4.1)%
Gross profit £2,496m £2,697m (7.4)% (6.3)%
Gross margin %* 36.7% 38.0% (130)bps (130)bps
Operating profit £531m £747m (29.1)%
Statutory pre-tax profit £474m £677m (30.0)%
Statutory post-tax profit £373m £556m (32.9)%
Statutory basic EPS 18.6p 26.4p (29.8)%
Net (decrease)/increase in cash(±) £(329)m £444m n/a
Interim dividend 3.80p 3.80p -
Adjusted metrics
Retail profit* £555m £767m (27.7)% (27.1)%
Retail profit margin %* 8.2% 10.8% (260)bps (270)bps
Adjusted pre-tax profit* £472m £669m (29.5)%
Adjusted post-tax profit* £368m £525m (29.7)%
Adjusted basic EPS* 18.3p 24.9p (26.6)%
Free cash flow* £104m £723m (85.6)%
Net debt*((1)) £(1,848)m £(908)m n/a
* See page 4 for further details on non-GAAP measures and other terms; (±)
Net (decrease)/increase in cash and cash equivalents and bank overdrafts
Highlights
· H1 performance in line with expectations (total sales -2.8% in
constant currency and LFL -4.1%)
· Sales significantly ahead of pre-pandemic levels (3-year LFL
sales +16.6%), supported by market share gains; Group Q2 sales trend ahead of
Q1
· Resilient sales from both DIY and DIFM/trade categories
· Continued effective management of inflation and supply chain
pressures
· Strong execution against our strategic priorities and investing
for growth - digital, trade proposition, Screwfix and Poland expansion
· Attractive shareholder returns through dividends and ongoing
second £300m share buyback programme; reflects confidence in long-term growth
and cash generation opportunity
Thierry Garnier, Chief Executive Officer, said:
"Kingfisher has delivered a very resilient first half of sales. While facing
very strong comparatives from the prior year as well as a more challenging
environment, LFL sales were 16.6% ahead of pre-pandemic levels with a
sequential improvement from Q1 to Q2. This was driven by the extension of
share gains in all our key markets, reflecting successful execution of our
strategy, and resilient sales from both DIY and trade customers. We are now
back to pre-pandemic levels for in-store product availability and maintaining
competitive pricing across our banners.
"Looking to the months ahead, although trading in the year to date has been in
line with our expectations, we remain vigilant against the more uncertain
economic outlook for the second half. We are therefore focussed on delivering
value to our customers at a time when they need it most. You can expect
continued strong execution, with a focus on growing sales and market share,
effective management of our gross margin, and alignment of our costs and
inventories to market conditions.
"With the business and our balance sheet in a strong position, we continue to
invest in opportunities to drive growth. B&Q successfully launched its
first home improvement marketplace during the period, and we are now preparing
for marketplace launches in France, Poland and Iberia. We are also continuing
to invest in the trade segment through Screwfix's expansion in the UK and
Ireland, as well as the further development of our offer for tradespeople
across our banners, building on the success of TradePoint. We are on course to
open our first Screwfix stores in France within a few weeks from now. And we
are developing innovative new products and services to support more
sustainable and energy efficient homes, which will benefit our customers and
the environment.
"These investments, together with the proven resilience of the home
improvement sector, our balanced exposure to DIY and DIFM/trade, and our
strong and consistent execution, support our confidence in continuing to grow
ahead of our markets."
H1 22/23 Group results
· Sales down 2.8% in constant currency, reflecting strong prior
year comparatives linked to high demand for home improvement products.
Resilient sales across both retail and trade channels
· LFL sales down 4.1% and corresponding 3-year LFL* up 16.6%
- Double-digit 3-year LFL sales growth across all banners (i.e.,
versus pre-pandemic levels)
- Positive 1-year growth in Poland, Iberia* and Romania; resilient
performance in France*; strong prior year comparatives for the UK &
Ireland*
· Q2 22/23 LFL sales up 17.4% on a 3-year basis, adjusted for a
c.0.7% adverse calendar impact; stronger trend than Q1 22/23 (+14.8%, adjusted
for a c.1.4% positive calendar impact)
· Total e-commerce sales* down 19% (3-year growth up 156%); new
B&Q marketplace proposition performing well, and omni-channel customer
engagement scores remain high
- E-commerce sales penetration* of 16% (H1 21/22 and H1 19/20: 19%
and 7%, respectively)
- B&Q marketplace gross sales* performing ahead of expectations,
representing 8% of B&Q's total e-commerce sales in August 2022
· Gross margin % down 130 basis points to 36.7% (H1 21/22: 38.0%;
H1 19/20: 37.0%), reflecting an exceptionally strong prior year comparative
('normalised' promotional activity versus the prior year, one-off logistics
spend to secure/manage seasonal and 'buffer' stock, and banner & category
mix)
· Retail profit down 27.1% in constant currency to £555m (H1
21/22: £767m; H1 19/20: £454m), largely reflecting very strong prior year
comparatives in the UK & Ireland
· Statutory pre-tax profit down 30.0% to £474m (H1 21/22: £677m;
H1 19/20: £245m), reflecting lower operating profit, partially offset by
lower net finance costs
· Adjusted pre-tax profit down 29.5% to £472m (H1 21/22: £669m;
H1 19/20: £337m), reflecting lower retail profit, partially offset by lower
net finance costs
· Free cash flow of £104m, down 85.6% (H1 21/22: £723m; H1 19/20:
£204m), largely reflecting working capital outflow associated with completion
of inventory rebuild programme
· Net decrease in cash of £329m (H1 21/22: net increase in cash of
£444m), largely reflecting lower free cash flow, and £390m of outflows in
relation to ordinary dividends and share buybacks
· Net debt of £1,848m (£1,572m as of 31 January 2022), reflecting
the net decrease in cash
· Net debt to last twelve months' EBITDA* of 1.3x (1.0x as of 31
January 2022)
· Interim dividend per share declared of 3.80p (FY 21/22 interim
dividend: 3.80p)
Outlook for FY 22/23
· An encouraging start to trading in the second half of the year:
- Q3 22/23 LFL sales (to 17 September 2022)((2)) up 15.2% on a
3-year basis, with 1-year LFL down 0.7%
- Continued resilience in outdoor and 'big-ticket' category sales
trends
· H1 performance and current trading in Q3 consistent with FY 22/23
adjusted pre-tax profit guidance of c.£770m, as set out at the start of this
year
· For the balance of year, we have run several trading scenarios to
take into account the potential for a more uncertain macroeconomic
environment. These point towards a range of outcomes for FY 22/23 adjusted
pre-tax profit((3)) of c.£730m to £770m
· Expect continued strong execution:
- Targeting further market share growth
- Anticipate full year gross margin % to be in line with
pre-pandemic level (FY 19/20: 37.0%)
- Accelerating investment in Screwfix France
- Committed to continued active and responsive management of our
operating costs*
- Anticipate reduction of stock levels in H2 related to sell-through
of a large part of 'buffer' stock previously held to protect product
availability
Continuing to deliver against our strategic priorities
· Strengthened competitive position in all key markets
· High revenue retention rates of customers acquired during the
pandemic
· France: on track to complete 'fixes' in H2; LFL growth above
market and priority to deliver more profitable growth
· Focused on investments to support long-term growth: Investing in
faster fulfilment and expanded product choice; targeting further store
expansion in Screwfix UK & Ireland and Castorama Poland; opening first
Screwfix stores in France within weeks; stepping up initiatives to further
increase trade penetration across the Group
· E-commerce:
- Expanded store-based picking model for faster click & collect
(C&C) and last-mile delivery, including optimised order management through
'digital hub' stores, roll-out of C&C lockers in Poland (also being tested
at B&Q) and continued successful roll-out of one-hour delivery with
Screwfix Sprint
- New e-commerce marketplace model successfully launched at B&Q
(100,000 SKUs* added in six months); preparing roll-out of marketplaces in
France, Poland, Spain and Portugal
· Own exclusive brands (OEB):
- OEB driving affordability, sustainability and wider customer
engagement
- OEB represented 45% of Group sales in H1 (H1 21/22: 46%); strong
performance in kitchen, bathroom & storage and EPHC (electricals,
plumbing, heating & cooling) categories
- Developing specific OEB for different retail banners and extending
ranges to support choice - roll-out of 32 new and redeveloped OEB brands
almost complete
· Mobile-led and service innovations:
- Embedding Scan & Go into the B&Q app
- Extending the roll-out of self-checkout terminals across B&Q,
Castorama France and Poland
- Extended 3D design tool capabilities to new categories (including
bathrooms, modular storage solutions, fireplaces)
· Compact stores and rightsizing:
- Continuing to test new compact stores and partnership models;
opened six new compact stores in H1 in the UK, France and Poland, and first
two B&Q franchise stores in the Middle East
- Positive initial results from the five stores rightsized in the UK
and France last year; preparing for further rightsizings in H2 (in line with
our previously announced target of up to 40 'big-box' store rightsizings
across B&Q and Castorama France over 10 years)
· Trade proposition:
- A record 31 new store openings for Screwfix in the UK &
Ireland in H1
- Screwfix online sales in France continue to perform well; first
distribution centre now operational, supporting opening of first stores in
France within a few weeks from now
- TradePoint (in B&Q) 3-year LFL sales growth of 34%,
outperforming core B&Q and Screwfix, and reaching 21% sales penetration
- Launched plan to grow trade customer penetration across all 'big
box' banners, including new trade loyalty programmes in Poland and Iberia, and
the introduction of new OEB and branded trade-focused ranges
· Costs and inventory:
- Multi-year cost reduction programmes partially mitigating against
inflation pressures
- Majority of year on year (YoY) increase in net inventory driven by
inflation (61%) and store expansion (7%)
- Proactive inventory purchases from Q4 last year to (i) rebuild
product availability, (ii) build seasonal and 'buffer' stock ahead of peak
trading, and (iii) secure lower cost stock,
- Actions underway to further optimise sourcing footprint and
maximise Group sourcing efficiencies
- Good inventory health, with stock provisioning rates below
pre-pandemic levels
· Responsible Business:
- Announced new net-zero emissions target for our operations (scope
1 and 2) by the end of 2040
- Innovative end-to-end solutions at B&Q and Brico Dépôt
France to help customers create a personalised energy efficiency action plan
for their homes, including access to relevant products and services
- New targets for growth of sustainable home product sales
Footnotes
((1)) Net debt includes c.£2.3bn lease liabilities under IFRS 16 in H1 22/23
(H1 21/22: c.£2.3bn).
((2)) 'Q3 22/23 LFL sales (to 17 September 2022)' represents the period from
31 July 2022 to 17 September 2022 compared against the equivalent period in
the prior year (i.e., 1 August 2021 to 18 September 2021). The corresponding
3-year LFL represents the period 31 July 2022 to 17 September 2022 compared
against the equivalent period in FY 19/20 (i.e., 4 August 2019 to 21 September
2019). The figures are provisional and exclude certain non-cash accounting
adjustments relating to revenue recognition.
((3)) 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 6). Not all the figures and ratios used are
readily available from the unaudited half year results included in part 2 of
this announcement. Management believes that these non-GAAP measures (or
'Alternative Performance Measures'), including adjusted profit measures,
constant currency and like-for-like (LFL) sales growth, are useful and
necessary to assist the understanding of the Group's results. Where required,
a reconciliation to statutory amounts is set out in the Financial Review
(Section 5).
Contacts
Tel: Email:
Investor Relations +44 (0) 20 7644 1082 investorenquiries@kingfisher.com (mailto:investorenquiries@kingfisher.com)
Media Relations +44 (0) 20 7644 1030 corpcomms@kingfisher.com (mailto:corpcomms@kingfisher.com)
Teneo +44 (0) 20 7420 3184 Kfteam@teneo.com (mailto:Kfteam@teneo.com)
Half year results announcement
This announcement can be downloaded from the Investors section of our website
at www.kingfisher.com (http://www.kingfisher.com) .
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, and subsequently available on demand. For
enquiries, please email investorenquiries@kingfisher.com
(mailto:investorenquiries@kingfisher.com) .
Financial calendar ((±) Dates are provisional and may be subject to change)
Q3 22/23 trading update 24 November 2022
Full year results 21 March 2023(±)
Q1 23/24 trading update 25 May 2023(±)
Half year results 19 September 2023(±)
Q3 23/24 trading update 22 November 2023(±)
American Depository Receipts
Kingfisher American Depository Receipts are traded in the US on the OTCQX
platform: (OTCQX: KGFHY) http://www.otcmarkets.com/stock/KGFHY/quote
(http://www.otcmarkets.com/stock/KGFHY/quote) .
The remainder of this release consists of seven main sections:
1) H1 2022/23 Financial performance summary and current trading
2) Group update (including 'Powered by Kingfisher' strategic plan)
3) Trading review by division
4) FY 2022/23 Technical guidance
5) H1 2022/23 Financial review and, in part 2 of this announcement, the
condensed financial statements
6) Glossary
7) Forward-looking statements
Section 1: H1 2022/23 Financial performance summary and current trading
Income statement summary
£m % Total Change % Total Change % LFL Change
2022/23 2021/22 Reported Constant currency Constant currency
Sales 6,809 7,101 (4.1)% (2.8)% (4.1)%
Gross profit 2,496 2,697 (7.4)% (6.3)%
Retail profit:
UK & Ireland 339 579 (41.3)% (41.3)%
France 129 129 +0.3% +2.4%
Poland 94 58 +58.6% +66.4%
Iberia 6 11 (41.9)% (40.7)%
Romania((1)) (4) (6) +25.3% +23.3%
Other(±) (13) (5) n/a n/a
Turkey (50% joint venture) 4 1 n/a n/a
Other International* 87 59 +43.7% +52.1%
Retail profit 555 767 (27.7)% (27.1)%
Central costs* (26) (27) (2.0)%
Share of JV interest and tax - (1) n/a
Operating profit 529 739 (28.5)%
(before adjusting items*)
Net finance costs (57) (70) (18.6)%
Adjusted pre-tax profit 472 669 (29.5)%
Adjusting items 2 8 n/a
Statutory pre-tax profit 474 677 (30.0)%
(±) 'Other' consists of the consolidated results of NeedHelp (acquired in
November 2020), Screwfix International (launched online in France in April
2021), and results from franchise agreements.
LFL sales by quarter
Quarterly sales % LFL Change
Q1 22/23 Q2 22/23 H1 22/23
UK & Ireland (15.8)% (7.1)% (11.6)%
-B&Q (18.3)% (7.4)% (13.0)%
-Screwfix (10.9)% (6.4)% (8.8)%
France (3.7)% (2.3)% (3.0)%
-Castorama - (1.0)% (0.5)%
-Brico Dépôt (7.5)% (3.7)% (5.5)%
Other International +37.1% +8.1% +19.5%
-Poland +54.5% +8.9% +25.9%
-Iberia (0.3)% +4.4% +2.3%
-Romania((2)) +13.9% +5.3% +8.9%
Group LFL((3)) (5.4)% (2.8)% (4.1)%
Total e-commerce sales((4)) (26.1)% (10.4)% (18.8)%
3-year LFL sales by quarter
Quarterly sales % 3-year LFL Change
Q1 22/23 Q2 22/23 H1 22/23
UK & Ireland +16.7% +15.3% +16.0%
-B&Q +16.3% +17.1% +16.7%
-Screwfix +18.0% +11.0% +14.4%
France +13.7% +13.8% +13.6%
-Castorama +13.9% +13.5% +13.4%
-Brico Dépôt +13.5% +14.1% +13.8%
Other International +22.2% +25.7% +24.3%
-Poland +22.8% +25.2% +23.8%
-Iberia +11.8% +18.8% +15.6%
-Romania((2)) +32.8% +46.7% +43.6%
Group LFL((3)) +16.2% +16.7% +16.6%
Total e-commerce sales((4)) +163.7% +149.6% +156.3%
Trading in Q2 22/23
LFL sales were down by 2.8% in Q2 and up 16.7% on a 3-year basis, showing
continued good momentum from Q1. Adjusting for calendar impacts, Q2 LFL sales
were up 17.4% on a 3-year basis, up from 14.8% in Q1. E-commerce sales were
down by 10% in Q2 as footfall returned to stores but up by 150% on a 3-year
basis. Sales remained resilient across our banners, with all reporting
double-digit 3-year LFL growth, and across customer segments (DIY* and
DIFM*/trade). This resulted in trading in line with our expectations,
supported by our focus on execution and market share gains.
In the UK, B&Q saw an overall improvement in 1-year LFL trends from Q1 to
Q2, benefiting from more favourable weather and improved product availability.
Sales of cooling products at B&Q were particularly strong in July given
the unusual heatwave. B&Q's 3-year LFL increased from Q1 to Q2 while
Screwfix's decreased somewhat, with lower YoY DIY revenues linked to very
strong demand in the prior year. 3-year LFL growth of B&Q and Screwfix's
trade revenues continued to be strong.
In France, 3-year LFL trends were similar from Q1 to Q2 with seasonal
categories also driving a modest improvement at Brico Dépôt.
Poland, Iberia and Romania all saw growth on a 1-year basis, and an
acceleration into Q2 of 3-year trends, driven by strengthening competitive
positions and effective trading activities.
Current trading in Q3 22/23
Q3 22/23 LFL sales (to 17 September 2022)((5)) are down by 0.7%, reflecting
strong comparatives in the prior year. On a 3-year basis, LFL sales are up
15.2%, with resilient sales trends in our outdoor, kitchen, and bathroom &
storage categories. E-commerce sales continue to progress well, and we are
pleased with the strong performance of our new marketplace proposition at
B&Q.
Footnotes
((1)) Kingfisher's subsidiary in Romania has historically prepared its
financial statements to 31 December. In the prior year (FY 21/22), Romania
migrated to Kingfisher's financial reporting calendar (year ended 31 January).
Its retail loss presented in H1 21/22 therefore included one additional month
of results (July 2021) in order to facilitate the alignment to Kingfisher's
financial reporting calendar. Reported and constant currency variances for
Romania's retail loss are for February to July 2022 (compared against January
to July 2021).
((2)) Further to footnote 1 above, Romania's LFL and 3-year LFL sales growth
compares equivalent periods in the current and prior years.
((3)) Group LFL includes e-commerce sales, and excludes Koçtaş (Kingfisher's
50% JV in Turkey). Other International and Group LFL on a 3-year basis exclude
Russia. (Kingfisher completed the sale of Castorama Russia on 30 September
2020.)
((4)) Total e-commerce sales are first-party e-commerce sales plus marketplace
gross sales. Please refer to the glossary in Section 6 for definitions.
References to digital or e-commerce sales growth relates to growth at constant
currency and covers the total Group. 3-year total e-commerce sales growth
excludes Russia.
((5)) 'Q3 22/23 LFL sales (to 17 September 2022)' represents the period from
31 July 2022 to 17 September 2022 compared against the equivalent period in
the prior year (i.e., 1 August 2021 to 18 September 2021). The corresponding
3-year LFL represents the period 31 July 2022 to 17 September 2022 compared
against the equivalent period in FY 19/20 (i.e., 4 August 2019 to 21 September
2019). The figures are provisional and exclude certain non-cash accounting
adjustments relating to revenue recognition.
Section 2: Group update (including 'Powered by Kingfisher' strategic plan)
The update is organised into the following key topics:
1) Update on Ukraine
2) Delivering on value and effectively managing pressures arising from the
current environment
3) France - on track to complete 'fixes' in H2
4) Strong execution against our 'Powered by Kingfisher' strategic
priorities
5) Clear financial priorities and capital allocation framework
1. Update on Ukraine
Our thoughts are with the people in Ukraine and Eastern Europe who are
affected by the conflict. We are part of the international effort to support
them and we stand ready to help further.
At the start of the crisis, we immediately offered our aid for Ukrainian
refugees, with all our retail banners working with organisations who are
supporting relief efforts, such as the International Red Cross and United
Nations High Commission for Refugees (UNHCR). Kingfisher has donated c.£0.5m
to help these organisations, including matched funding for colleague donations
to the Red Cross Ukraine Crisis Appeal.
Two of our banners, Castorama Poland and Brico Dépôt Romania, are in
countries bordering Ukraine and have been working hard to provide funds and
practical assistance to refugees. Across all our other banners, our teams have
been raising money and organising support for refugees, including establishing
in-store and online donation facilities for customers. This allows them to
donate funds or essentials such as clothes, blankets, medicines and hygiene
products. In addition, B&Q is donating profits from the sale of certain
products, and many of our banners have worked closely with the Red Cross to
find employment for refugees in our stores.
Many of our colleagues have been personally affected by the war, particularly
in Poland which is home to many people of Ukrainian descent. Castorama Poland
has made counselling available for all store and head office employees,
recognising that the war is a source of stress and anxiety, particularly for
colleagues whose friends or family are directly affected. In Romania, Brico
Dépôt has supported colleagues via a hotline offering free and anonymous
counselling, as well as legal and financial advice.
The Group has no direct business exposure to the conflict, having completed
the sale of Castorama Russia to Maxidom, a Russian home improvement company,
in September 2020. We have no operations in the country, and we do not provide
sourcing to Maxidom.
We have not seen disruption to our supply chain to date. On 1 March 2022, we
decided to stop selling the limited number of products directly sourced from
Russian and Belarusian suppliers across the Group, and removed those products
from our shelves. We are also engaging with our suppliers to help ensure that
they are no longer sourcing materials or components from Russia or Belarus.
2. Delivering on value and effectively managing pressures arising from the
current environment
We are committed to delivering value for our customers, at a time when they
need it most, while also effectively managing near-term operational challenges
that continue to impact our industry and markets.
Inflation
In common with other businesses, we have seen higher than normal cost price
inflation (CPI) over the last 18 months, caused by rising prices for raw
materials, energy, wage increases and higher freight costs.
As expected, year on year CPI stepped up in H1 as we sold through higher-cost
inventory and experienced higher contracted freight prices. We continue to
manage these impacts effectively.
While many raw material prices such as metals and plastics are now below their
recent peaks, and maritime freight costs (i.e., spot rates) have been on a
downward trend since January, we expect inflationary pressures to persist in
H2 due to the time lag between ordering products (at a relatively higher cost)
and their subsequent sale (and therefore cost recognition in our income
statement). Favourable movements in our YoY foreign exchange hedging positions
will offset some of the increases. Approximately 20% of our cost of goods sold
(COGS) is directly sourced in USD, and we maintain hedging contracts for
periods up to 18 months, with our forecast USD COGS exposure in FY 22/23 fully
hedged.
Supply and logistics
High demand, port congestion and COVID lockdowns have placed considerable
strain on the industry's global supply and logistics network over the last two
years.
To date, the strength and expertise of our supply, sourcing and logistics
teams have enabled us to manage our supply and logistics needs effectively. We
decided in the summer of 2021 to build inventory from Q4 21/22 in order to
further improve our product availability, to secure seasonal and 'buffer'
stock ahead of our peak trading season, and to purchase ahead of anticipated
further cost price inflation. We have worked closely with suppliers and
logistics providers, helping us to mitigate industry-wide availability issues.
The key product availability risks that we saw in FY 21/22 have eased in H1
and we are pleased with both overall and 'best seller' product availability,
which have been at pre-pandemic levels since Q1. This has supported our
continued market share gains.
Costs and capacity in the global freight market was a constant challenge in
2021. We have carefully managed freight costs and availability, and
successfully navigated through shortages of heavy goods vehicles drivers.
Whilst we expect to experience higher YoY freight costs throughout 2022, we
note that the freight headwinds noted above that have forced prices up over
the last 18 months have been easing since January.
For further details please refer to 'Source and buy better, reduce costs and
same-store inventory', below.
Delivering on value
In this inflationary environment, Kingfisher is strongly committed to deliver
on value for our customers.
We are mindful of the impact rising consumer prices could have on customer
demand. Our focus on attractive price positioning across the Group means we
are well positioned, with an aim to maintain a price index at 100 or below
versus our nearest competitors. Customers can also choose lower-priced and
high-quality products from our own exclusive brand (OEB) ranges, which
represented 45% of Group sales in H1 22/23 (H1 21/22: 46%). We also have some
of the industry's best hard discounters in Brico Dépôt France and Iberia,
who together represent c.20% of Group sales.
Of particular importance in the current environment, we are also very well
placed in energy efficiency categories such as loft insulation, LED lighting,
underfloor heating and electric radiators, and we are developing other
innovative solutions to actively support our customers as they look to
mitigate the impact of rising energy costs. For further details please refer
to 'Build a mobile-first and service orientated customer experience' and 'Lead
the industry in Responsible Business practices', below.
3. France - on track to complete 'fixes' in H2
The Group's strategic progress over the last two and a half years has
benefited from some of the capabilities that we had previously developed.
These include Group sourcing and buying, developing our OEBs and our
investment in a common SAP platform. However, we also faced many unresolved
issues from previous years.
As part of our 'Powered by Kingfisher' plan, we set out our 'focus and fix'
priorities to address these issues. We made rapid progress in FY 21/22,
completing all the required 'fixes' in the UK and Poland and we are on track
to complete our 'fixes' in France this year.
These actions have significantly improved our trading, both in store and
online, while supporting the roll-out of our strategy.
Set out below is our progress with the France 'fixes' in H1:
· We progressed the roll-out of Brico Dépôt's updated SAP
platform without disruption and expect to complete it before the end of FY
22/23.
· We are also on track with implementing 'seamless payments' and
'dotcom+' solutions in all Castorama stores by the end of FY 22/23. 'Seamless
payments' is an up-to-date and frictionless customer payment experience,
enabling self-checkout and 'Scan & Go' technologies, and 'dotcom+' is an
in-store ordering solution, enabling more digitally-enabled sales*. Both
solutions have already been successfully introduced at B&Q, leading to
significant improvements in the customer proposition and experience.
· We continue to reorganise our logistics operations in France, to
create an optimised network for Castorama and Brico Dépôt. We have made
significant progress with optimising distribution centre space, as well as
transforming our cross-dock sites. The final distribution centre space
reductions in France will be completed this month, bringing cumulative space
reduction to c.27% versus two years ago (c.19% as of 31 July 2022).
- Note: cross-docking is a logistics practice of moving product from
a manufacturer to stores through a cross-dock facility, with little or no
storage in between.
· This programme will significantly reduce the travel distance
required to service our stores, resulting in shorter lead-times, better
customer service, lower inventory and reduced greenhouse gas emissions.
· We continue to make good progress with extending and optimising
Castorama's ranges, by introducing more local and international brands, and by
launching new OEBs. We added more than 1,200 SKUs over the last six months,
bringing the total added over the last two and half years to more than 8,500.
As previously announced, we expect to complete our work on improving
Castorama's range by the end of FY 22/23.
· Brico Dépôt, one of our industry's leading discounter banners,
is also optimising its range to increase its differentiation from Castorama
and other general DIY peers. We are improving the banner's already
price-leading proposition, reducing some non-core ranges and introducing
discount OEBs (such as the Evalux paint discount brand) and more local trade
brands. Optimising SKUs will give us more volume and pricing power for key
products, reinforcing Brico Dépôt's 'discounter DNA'.
· Our price positioning in France is very competitive, with both
banners improving their price index this year. While we do not anticipate
requiring any further significant investment in price for the remainder of the
year, the DNA of a discounter like Brico Dépôt is to continuously reduce its
cost to sales ratio, improve its sales density and reinvest part of this
efficiency into price positioning.
· Following Pascal Gil's appointment as the CEO of Castorama Poland
(in early April 2022), Laurent Vittoz has moved from leading our Group
Sourcing team to replace Pascal as the Managing Director of Brico Dépôt,
reporting to the CEO of Kingfisher France, Alain Rabec.
The actions described above, along with continued strong delivery against our
wider strategic priorities, have contributed to a significantly improved
performance in France over the last two and a half years. 3-year LFL sales are
up 13.6% in France and, following years of underperformance, France's LFL
sales are growing ahead of the market. Based on Banque de France* data,
France's H1 22/23 LFL sales grew ahead of the market YoY.
The completion of our 'fixes' in France will also help us deliver on our
priority of more profitable growth in France. In H1, in constant currency,
France's retail profit margin improved 30 basis points to 5.6% (H1 21/22:
5.3%), with its retail profit increasing 2.4%.
Customers have reacted positively to our work in France, with Net Promoter
Scores (NPS) improving in both French banners. The store NPS for both
Castorama and Brico Dépôt France have improved over the last three years,
with an increase of +12 and +10 points, respectively. We have also made
considerable progress online, with castorama.fr showing a +29 point increase
in NPS, and bricodepot.fr showing a +20 point improvement over the last three
years.
4. Strong execution against our 'Powered by Kingfisher' strategic
priorities
In June 2020, we announced our strategic plan - 'Powered by Kingfisher'. This
plan aims to maximise the benefits of combining our distinct retail banners
(which serve a range of different customer needs) with the scale, strength and
expertise of the Kingfisher Group, so we can address the significant growth
opportunities we see in the home improvement market.
Our retail banners occupy number one or two positions in all our key markets.
Some are predominantly trade focused (Screwfix, TradePoint), while others
address more general DIY needs (B&Q, Castorama France, Castorama Poland,
Brico Dépôt Romania, Koçtaş), and Brico Dépôt France and Brico Dépôt
Iberia are discounters. This differentiation is a major strength for us,
especially in a more volatile and uncertain world.
Kingfisher's scale and resources are an important source of growth and
competitive advantage for our banners. They benefit from Group-wide OEB
product development, sourcing and buying scale, leading technologies, customer
and market data insight and analysis, shared services and best practices, and
cost and inventory management support.
We are pleased with the progress we have made over the last three years,
achieved in an extraordinarily challenging operating environment. We have made
good progress with our core strategic priorities whilst investing for growth
in multiple areas of the business. This has driven an improved competitive
position in our key markets.
The following sub-section covers the progress made in H1 against our key
strategic focus areas:
a) Grow e-commerce sales
b) Differentiate and grow through own exclusive brands (OEB)
c) Build a mobile-first and service orientated customer experience
d) Test compact store concepts and adapt our store footprint
e) Expand engagement with trade customers
f) Source and buy better, reduce costs and same-store inventory
g) Lead the industry in Responsible Business practices
a) Grow e-commerce sales
We are committed to growing our e-commerce sales by offering speed,
convenience and choice to our customers.
E-commerce sales remain significantly ahead of pre-pandemic trends, driven by
improvements to our e-commerce proposition that offer our customers more
convenience, broader product choice and faster fulfilment of orders, powered
by our store assets.
Total e-commerce sales, which for the first time this period includes gross
sales from third-party e-commerce marketplace transactions, as well as
first-party e-commerce sales*, were £1.1bn in H1. This represents a decline
of 19% YoY (in constant currency), and an increase of 156% on a 3-year basis.
Overall e-commerce sales penetration was 16% in H1 (H1 21/22: 19%; H1 19/20:
7%). Our digitally-enabled sales were c.24% (FY 21/22: 26%; FY 19/20: 20%),
highlighting that approximately a quarter of Group sales are from e-commerce
channels and online orders placed in-store, delivered through click &
collect (C&C) or to customer homes. We expect digitally-enabled sales to
continue to grow over time, in line with the continued evolution of both
customer behaviours and our in-store technologies and solutions.
Sales from C&C, our most popular online fulfilment channel, were down 22%
YoY reflecting very strong prior year comparatives, although remain ahead of
pre-pandemic levels with growth of 195% on a 3-year basis. C&C accounted
for 87% of total e-commerce orders (H1 21/22: 87%) and 70% of total e-commerce
sales (H1 21/22: 73%). The popularity of this fulfilment channel has been
supported by significant enhancements to the options available to customers to
collect their orders, including car park collection capabilities in France, as
well as contactless 'Drive-thru' collections in both France and Poland, for
all our medium and large stores. During H1 we completed the roll-out of
C&C lockers to Castorama Poland stores and continued testing C&C
lockers at some B&Q stores. Our new store format trials are also
increasing C&C options for customers, in particular through our high
street compact stores, which allow us to expand into city centres.
Home delivery sales were down 11% YoY reflecting higher footfall in stores,
and up by 97% on a 3-year basis. Faster fulfilment is a key competitive
advantage for our banners, in particular over 'pure-play' online peers, so we
have increased our focus on next-day and same-day home delivery. In August
2021, Screwfix launched Screwfix 'Sprint', offering delivery direct to home or
site within one hour. 'Sprint' is currently available from over 300 stores,
covering c.45% of UK postcodes, with further roll-out planned in H2. So far,
the average delivery time is c.45 minutes and our quickest delivery is just
eight minutes. Feedback from customers, especially our most loyal trade
customers, has been very positive, and we believe this will help us to
continue growing our market share. 'Sprint' reinforces Screwfix's focus on
speed and convenience for customers, alongside its industry-leading one-minute
C&C proposition. We are sharing lessons from the roll-out with other
retail banners that are testing same-day delivery, including B&Q.
Moving to store-based picking and fulfilment has been critical to enabling us
to serve our customers efficiently, in line with the scaling up of e-commerce
volumes over the last two and a half years, reaching up to 1.5 million orders
a week at peak. This also gives us the ability to flex up or down in response
to short term changes in demand, without being exposed to high fixed costs. In
H1, we picked 91% of the Group's e-commerce orders in store (excluding
Screwfix: 87%). We are also leveraging our stores to improve the speed and
cost of home deliveries. At present, 54 B&Q stores are being used as
'digital hubs' for fulfilling home deliveries, serving nearly 100% of UK
postcodes. These hub stores are selected based on their catchment and the
depth of their in-store range. Similar models have been introduced at
Castorama France and Castorama Poland.
Several innovative digital initiatives are being developed and tested at
B&Q, with a view to broader adoption across Kingfisher's retail banners.
During H1 we commenced the development of optimised order management
capabilities, leveraging B&Q's hub stores to cast a wider net for the
availability of products ordered online, thereby lowering the rate of
abandonment of online baskets. The business is also testing a new product
substitution algorithm to help minimise lost sales. Finally, B&Q rolled
out new capability in digital colleague apps to enable more efficient picking,
stock accuracy and shelf re-organisation, whilst unlocking improved stock
updates for an improved online customer experience.
Finally, we believe we can add significant value for customers by offering
them more product choice. Kingfisher is very well placed to benefit from the
growing trend of shopping on e-commerce marketplaces. Our retail banners have
top one or two market positions; they already have significant online traffic;
they have strong brands and are trusted by millions of customers; they are
able to leverage their store assets to offer faster delivery, pick-up and
return options for customers; and they have long-standing and trusted
relationships with a growing global supplier base.
Using scalable technology built by Kingfisher alongside Mirakl, the leading
marketplace platform provider, we launched our first e-commerce marketplace on
B&Q's www.diy.com in March 2022. Approximately 200 carefully selected
third-party sellers are now offering new products in 10 home improvement
categories, including wallpaper, lighting, power tools and small domestic
appliances, the latter being a new category for B&Q. B&Q successfully
reached its target of 100,000 additional home improvement SKUs within six
months of launch, compared to its previous offer of c.40,000 products.
B&Q's marketplace has grown quickly since March, reaching a marketplace
participation* of 8% in August 2022 (i.e., B&Q's marketplace gross sales
divided by B&Q's total e-commerce sales). Over the medium term, further
rapid expansion of the number of SKUs is planned, and in addition we are
preparing for the roll-out of marketplaces in France, Poland, Spain and
Portugal, leveraging the technology already built by Kingfisher for B&Q.
b) Differentiate and grow through own exclusive brands (OEB)
We believe that our OEB product development is a significant source of value
for our retail banners and their customers. OEBs provide a strong point of
differentiation in terms of design, functionality, sustainability and value
for money, as well as carrying a higher gross margin (on average) than branded
products. We aim to grow our OEB sales further, as we bring even more
innovation to our ranges and differentiation to our banners.
With the households in our markets being impacted by the rising cost of
living, the differentiation brought by our OEB proposition is more important
than ever. From an affordability perspective, our OEB products are, on
average, 15-30% cheaper than branded products (for example, our Erbauer brand
compared to its branded power tool competitors). However, it's not just about
affordability. Our OEBs provide an opportunity to meet customer needs by
designing innovative products, whilst also supporting our ambitious
sustainability goals. For example, with our Verve brand we aim to make our
watering products affordable and accessible, whilst simplifying the user
experience and using our innovation to adopt recycled plastic and water-saving
features.
As well as promoting affordability and sustainability, our OEBs aim to
simplify projects, thereby encouraging and engaging more people to complete
home improvement tasks. For example, earlier this year we launched new OEB
sealants ranges, Volden and No Nonsense, which includes an ecosystem of
products to help customers at all stages of their projects. This includes
tools to remove old sealants, smoothing tools and an award-winning applicator
system. In H1, sales of our Volden and No Nonsense sealant products were up
both YoY and on a 3-year basis.
The performance of our OEB ranges in H1 was resilient against very strong
prior year comparatives, with LFL sales down 5.2%. LFL sales were up 18.1% on
a 3-year basis, outperforming the growth of non-OEB ranges. Total OEB sales
were £3.1bn, representing 45% of Group sales (H1 21/22: 46%). This is
particularly impressive when considering our retail banners' renewed focus on
offering more choice to customers, including through a wider range of local
and international branded products. Kingfisher's top five OEBs, based on their
breadth of differentiated ranges, innovation and growth potential, are
GoodHome, Verve, Erbauer, Magnusson and LAP. These contributed 19% of total
Group sales (H1 21/22: 19%; FY 19/20: 11%).
We are leveraging our OEB capabilities to provide differentiated and
specialised products for our general home improvement, trade and discounter
banners. Over the last 18 months, we have developed a strong pipeline of
innovative products, with an overall portfolio of 32 new and redeveloped OEBs.
The roll-out of these OEBs is now almost complete, and we will be looking to
further extend the new OEB pipeline in H2. For example, Evalux, a
high-performance discount paint range sold only at Brico Dépôt France, has
been performing well since its launch earlier this year. During H1 we
relaunched GoodHome paint in all our general home improvement banners to
create an unrivalled paint offering from selected ready-mixed colours for
customers, increasing choice to 2.2 million paint options via tinting
machines. This relaunch includes our first bio-based paint, Naturea. At
B&Q and Screwfix, respectively, we are launching new featured ranges
for MacAllister and Titan power tools incorporating a better battery
platform, whilst keeping our selling prices low, helping to make home
improvement projects easier and more cost-efficient.
The OEB kitchen range continues to receive strong customer feedback on design,
innovation and value for money. It remains one of our top-performing new
ranges for the Group and has been a key contributor to our banners' market
share growth. Supported by market-leading price positioning, installation
services and an enhanced in-store sales journey, the Group LFL sales
performance of the new kitchen range was positive in H1 (mid-single digit %
growth), up by nearly 20% on a 3-year basis. B&Q is further enhancing its
digitally-enabled customer journey for kitchens by testing virtual reality
technology in 10 stores. This allows customers to visualise pre-set 3D kitchen
designs through virtual reality headsets in-store. The performance of our
kitchen range at Castorama Poland has demonstrated our ability to create a new
market opportunity having the right combination of offer, price and service,
delivering over 60% LFL sales growth in H1.
Our OEB ranges have also given us a platform to accelerate our Responsible
Business goals, with our sustainability guidelines fully integrated into OEB
product design and development. Sustainable Home Products (SHPs) either help
our customers live more sustainably (such as water-saving taps or loft
insulation) or are sustainable because of their input materials or how they
are manufactured (for example, FSC timber, peat-free compost or recycled
plastic). In FY 21/22, 55% of OEB product sales were SHPs. Two OEB ranges,
GoodHome and Verve, have already exceeded their SHP sales targets. Please also
refer to 'Lead the industry in Responsible Business practices' below for more
details on how we are using OEB to drive further SHP growth, including more
energy and water-efficient products.
We are also looking at ways for our OEB products to play a bigger role in the
'circular economy'. For example, B&Q and Castorama France have begun
offering tool repair and maintenance services. For further details please
refer to 'Build a mobile-first and service orientated customer experience',
below.
c) Build a mobile-first and service orientated customer experience
Our mission is to grow our mobile channel by creating great customer
experiences. We will continue to grow our active app user base by optimising
our app stores, using push messaging and in-app offers, and improving design
and performance. We are also providing customers with a more compelling and
complete range of services, including augmented reality, 3D design tools, and
installation services.
Mobile remains our largest and fastest growing channel (versus desktop and
tablet) and has performed strongly compared to pre-pandemic levels. Sales
through the mobile channel were down 19% in H1 but up 280% on a 3-year basis,
accounting for 54% of our first-party e-commerce sales (H1 21/22: 54%). This
is an increase of 18 percentage points since H1 19/20.
Across our banners, we continue to optimise the mobile user experience through
Group-driven technology and capabilities, which is resulting in faster
page-loading times, enhanced 'search, shop and pay' features, and new mobile
tools and features. We are providing customers with unique, app-first
experiences such as Screwfix 'Sprint' (home delivery within one hour), and
features that enable greater customer convenience and self-service within our
stores. Since its launch in February 2021, our new Screwfix app has been
downloaded 2.6m times, with 30x faster search results and 6% higher conversion
versus the Screwfix website. The app also uses geolocation to speed up
in-store pickups, and enables targeted customer offers. Brico Dépôt Iberia
launched its trade customer loyalty app in Q1, with strong early results.
We are automating marketing campaigns and maturing our mobile and app
capabilities, giving us the ability to test prototypes and run faster 'A/B
tests' (meaning we compare two versions of a webpage or app to see which
performs better). This is giving our teams richer data, which we can use to
optimise the experience for our most frequent and valuable customers. We have
also unlocked push notifications across the B&Q, Castorama France and
Screwfix apps, thereby driving user traffic.
We are continuing to modernise the in-store experience and now have
self-checkout terminals in 261 stores across B&Q (169), Castorama France
(49) and Castorama Poland (43). We are seeing very strong adoption by
customers in store, ahead of expectations, resulting in meaningful efficiency
gains. Following successful tests, Scan & Go apps in B&Q, Brico
Dépôt France and Brico Dépôt Iberia continue to make the checkout
experience faster. B&Q and Castorama France are also testing in-store
digital ordering terminals to modernise the purchasing experience.
We also continue to test different payment options online, with 'Buy Now, Pay
Later' and 'Pay in Instalments' options available via PayPal in the UK and
France. Additionally, new credit options for all customers (trade and
non-trade) are being developed in H2 with third-party providers.
Following the successful introduction of our Group-developed 3D design tool
for kitchens, we have extended the technology to enable customers to create 3D
designs of bathrooms, storage furniture, and fireplaces. Furthermore, to make
it easier for customers to visualise their projects, we are testing virtual
reality headsets and widescreen panoramic experiences in 10 B&Q stores,
with the ambition to roll these out across B&Q if successful.
We are continuing to grow our installations and services offer for our DIFM
customers. Both kitchen and bathroom installation services are now available
in all our general home improvement and discounter banners. Group sales of
showroom products with installations increased by 56% YoY in H1. NeedHelp, our
leading home improvement services marketplace, is now live throughout the UK,
France and Poland. In H1, we saw good growth of the platform, with a 37%
increase YoY of the gross merchandise value of completed jobs. Screwfix and
TradePoint have launched partnerships with NeedHelp in the UK, providing their
tradespeople customers with free local leads via the NeedHelp platform. Brico
Dépôt France also launched a dedicated kitchen installation service in
partnership with NeedHelp.
We are also launching services that support our Responsible Business
ambitions, and help our customers make choices that are better for them and
more responsible for the planet. To keep products in use longer, Screwfix and
Castorama France have launched online refurbished product stores. B&Q has
introduced a new Erbauer tool repair service, and Castorama France has
partnered with Swap, the servicing and maintenance company, for outdoor
motorised tools. To help customers (particularly trade customers of
TradePoint) dispose of their project waste responsibly, B&Q has launched
partnerships with AnyJunk and LoveJunk in-store and online, providing licensed
waste clearance and skip hire. B&Q and Castorama France are continuing
their respective tool hire partnerships with Speedy Hire and LOXAM, with a
focus on driving stronger integration within the customer journey and the
development of online propositions to enable a broader reach.
The ongoing energy crisis adds weight to the urgent need for greener homes and
energy efficiency. In the UK, two thirds of homes have an energy performance
certification rating of 'D', or worse, and at least 19 million homes need
better insulation. In the coming weeks, B&Q will launch an innovative
end-to-end solution to help customers create a personalised energy efficiency
action plan for their homes, and then access the relevant products and
services via B&Q and its partners to take action.
In France, energy efficiency renovations have become even easier and more
popular, with Castorama and Brico Dépôt launching dedicated finance products
linked to the French government's MaPrimeRénov grant programme. To further
support this initiative, and deliver value for our customers and help them
save energy, in H2 Castorama will launch partnerships with several national
installers supporting key aspects of energy efficiency improvements (for
example, the installation of air source heat pumps and solar panels in
residential properties). Castorama is also planning to pilot an energy
efficiency audit service which will provide customers with a view of their
energy usage combined with a tailored plan to increase energy efficiency in
their homes. In the coming weeks, Brico Dépôt France will launch an online
energy diagnostic tool to help customers diagnose and fit energy efficiency
solutions.
d) Test compact store concepts and adapt our store footprint
Stores are a critical part of the home improvement market. Customers want to
be inspired, to be able to visualise what they buy, and to get advice and
design services from in-store experts. Stores also serve as a 'one-stop shop'
for projects and allow us to provide customised services. Our c.1,500 stores
also play an integral role in meeting the increasing customer demand for
convenience and speed, whether through fast C&C or delivery to where the
customer wants it.
We continue to increase our overall store count, while reducing the average
size of our stores. We aim to achieve this over time by opening more 'compact
stores' (less than 2,000 sqm), rebalancing our larger size 'new store' opening
programme to mostly focus on 'medium-box' stores (2,000 to 8,000 sqm), and
'rightsizing' a relatively small proportion of our larger format 'big-box'
stores (more than 8,000 sqm).
Compact stores are a key enabler for growing our market share in urban areas.
We have made good progress with testing different concepts to unlock this
opportunity. In H1 we added six compact stores tests, bringing the total to
31. These tests span three markets and four retail banners (Screwfix, B&Q,
Castorama France and Castorama Poland), and are located in small retail parks,
high streets and within supermarkets. Further tests are planned in H2 and 2023
in the UK, France and Poland.
Our high street concept tests (300-800 sqm) are delivering positive results.
We now have eight high street concepts open in the UK and France, including
our first two compact stores in Paris, which opened in Les Lilas and Levallois
in February. We continue to learn from these tests and optimise subsequent
store openings to create a scalable blueprint for the future. In August, we
opened our first 500 sqm concept store in Poland, in Warsaw, under the
Castorama Express banner.
Our trials of B&Q 'grocery concessions' (200-250 sqm) continue in ASDA
stores in the UK (eight locations to date), testing and optimising both
in-fill (where B&Q stores are in close proximity) and unserved locations.
Our small retail park store concept tests (800-2,000 sqm) continue in B&Q
(four stores) and in Poland (three stores, where they trade under the
Castorama Smart banner). During H1 we opened one new small retail park store
at each of B&Q and Castorama Poland. We see positive results from this
concept, especially larger stores in the 1,500-2,000 sqm subset, where we can
provide broader product ranges and services. This concept, along with our high
street stores, support our ambitious store roll-out strategy in Poland, to
increase penetration in small towns and cities and reinforce Castorama
Poland's leading market position. Brico Dépôt France will also be testing a
1,000 sqm format in Q1 23/24.
Screwfix continues to test its ultra-compact 'XSR' store format, which has
been developed to take the core Screwfix range into spaces unable to cater for
the full traditional trade counter offer. Screwfix opened two more 'XSR'
stores in H1, bringing its total to seven, and is successfully experimenting
with the format in a variety of urban and rural locations, with more tests
planned for H2. In addition, the Screwfix 'Collect' concept, launched in
London Victoria in 2020, has seen a complete overhaul of the customer
experience and range, and is performing ahead of expectations.
Store rightsizings completed in the last 12-18 months have shown very
encouraging results. The three B&Q 'big-box' rightsizings completed in FY
21/22 saw c.15-30% of space taken over by discounter retailers, bringing
incremental footfall to the vicinity of these stores. Since reopening, the
stores have exceeded our performance expectations, with strong sales retention
and improved profitability. In France, where we completed two 'big-box'
rightsizings at Castorama France (Gonesse and La Rochelle) in January 2022, we
have selected a grocery partner to fill the vacated c.20-30% space. Initial
sales of these rightsized stores are positive. Further rightsizings are
planned in H2.
As a reminder, last year we announced that we expect up to 40 'big-box' stores
across B&Q and Castorama France to be rightsized over 10 years, including
the reallocation of space to e-commerce operations and fulfilment hubs. This
space reduction equates to a relatively small proportion of Kingfisher's store
estate, and approximately 3% to 4% of the combined selling space of B&Q
and Castorama France.
Finally, we believe partnerships can enable Kingfisher to attract new
customers and generate incremental revenues. Earlier this year we opened our
first franchise store under the B&Q banner in the Middle East, with a
further store opening in May. The stores and support office functions are
fully operated and staffed by the Al-Futtaim Group (https://www.alfuttaim.com/
(https://www.alfuttaim.com/) ).
e) Expand engagement with trade customers
Trade customers are an integral part of the home improvement ecosystem and a
key priority for Kingfisher. While we already have strong and growing
participation, there are significant opportunities to engage further with
trade customers. This includes continuing to roll-out trade counters,
international expansion, digital enhancements, range expansion, loyalty
programme optimisation, improved merchandising, more partnerships and new
services.
Screwfix, the UK's number one light-trade retailer, continues to expand
through its capital-light small format outlets. We are pleased to have opened
31 new outlets in H1 (28 in the UK and three in Ireland), bringing the total
to 821 as of 31 July 2022. We are on track to reach our goal of over 80 new
stores this financial year and remain confident of reaching more than 1,000
stores in the medium term in the UK & Ireland.
As part of our international expansion plans, Screwfix launched as a pure-play
online retailer in France in April 2021. Results have been very encouraging,
with strong web traffic and conversion rates, and growing brand awareness
across the country. We are making good progress with building a new supply
chain, with our first distribution centre now open, and a strong pipeline of
local and national vendors selected and onboarded. We expect to open
Screwfix's first stores in France within a few weeks from now, with a
meaningful step-up in roll-out targeted in 2023. This will position us to
start taking share from the large trade segment in France, which has an
estimated total market size of over £20bn.
B&Q's trade-focused banner, TradePoint, continues to build strong
foundations for growth. TradePoint's LFL sales outperformed the rest of
B&Q (and Screwfix) in H1, down just 3.1% in H1, with low single-digit
growth in Q2 despite strong comparatives. TradePoint's 3-year LFL sales were
up 34% in H1. This brings the business to £435m of sales in H1, representing
21% of B&Q's total sales (H1 21/22: 19%). Looking forward, we have put
together a strong plan to drive TradePoint's annual sales to more than £1bn.
Work is underway to develop and grow TradePoint's loyalty programme, implement
new trading approaches, update and expand TradePoint's store counters,
implement new trade-specific ranges (such as Harris Trade, Turbo Silver/Gold
and No Nonsense) and services (such as tool hire - see below), and enhance the
business' digital and online experience. Work is also ongoing to launch the
TradePoint proposition in Ireland.
More broadly, we believe there is a significant opportunity to increase trade
customer penetration across all our other retail banners, benefitting from
lessons learned in Screwfix and through TradePoint's successful relaunch. Over
time, we expect increased trade customer penetration to contribute to higher
sales and profit growth. In H1, we launched our Trade 'Centre of Excellence'
at Kingfisher, to bring together experts from across our banners and Group
functions to share knowledge, insights and feedback from customers. We are
aligning our trade strategy across five key pillars: store formats, pricing
and loyalty, product range, services and digital.
Within store formats, we are considering dedicated trade counters in France,
Poland and Iberia. The initial focus on pricing and loyalty saw the pilot
launches of pro loyalty programmes in Poland and Iberia in H1, with
encouraging early results. Within product range, other than the new ranges
launched in TradePoint, as noted above, we launched our new OEB Erbauer 12V
power tool range in Screwfix and Castorama France. The 12V ecosystem provides
a more compact range to our 18V offer, bringing power tool capabilities to
smaller areas, ideal for tradespeople working in confined spaces or on more
intricate work where larger tools are inefficient. In August, Screwfix
announced a partnership with decorating specialist Lick to exclusively
distribute LickPro, a high-quality paint range of 127 trend-led colours
specifically designed for tradespeople, with high opacity, low splatter and
minimal clean-up. Lick and Screwfix will also pioneer innovative new
technology to reduce waste. Once an order is placed with Screwfix, it will be
sent to the Lick master paint mixer who combines technology and engineering in
its manufacturing process to reduce unnecessary waste generated by pre-mixed
paint. Additionally, LickPro paints reinforce Screwfix's commitment to
sustainability, with the range being low odour, low VOC (volatile organic
compound), and water-based for improved indoor air quality. In H2, we plan to
bring several more new and innovative trade-focused products to market.
In services, in H1 we expanded our tool hire tests by a further 10 stores,
with tool and equipment hire now available in 79 stores across B&Q (38)
and Castorama France (41), through partnerships with Speedy Hire and LOXAM,
respectively. To further support our partnership, in H1 we developed an online
referral process to Speedy Hire for TradePoint.co.uk customers. Our
partnerships with AnyJunk and LoveJunk are being directly targeted towards the
trade customers of TradePoint, to make responsible waste disposal for projects
easily accessible. In digital, Screwfix 'Sprint' continues to deliver
essential items to trade customers within one hour, exclusively on the
Screwfix app. In 2023, TradePoint is planning to launch a dedicated app to
make membership tracking and purchases easier to complete, and we are
increasingly utilising our scale and data expertise to drive tradesperson
loyalty through more relevant and personalised content.
f) Source and buy better, reduce costs and same-store inventory
We have identified significant opportunities to reduce costs across
Kingfisher, through initiatives covering store productivity, goods not for
resale (GNFR*), supply and logistics, overheads and property (including lease
renegotiations). In addition, through value engineering and the use of our
scale, we expect to extract further value from sourcing and buying. Reducing
same-store inventory levels is also a priority.
Costs
Over the last two and a half years we have had multiple cost-reduction
projects in place covering all of our retail banners and Group teams, with
robust governance at Group Executive and Board level. The following areas have
contributed to partially offsetting cost growth in H1 22:
· Store productivity - Increasing staff productivity through the
use of technology and implementing new store operating procedures. In
particular, we have now rolled out self-checkout terminals in 261 stores
across B&Q (169), Castorama France (49) and Castorama Poland (43), with
strong take-up from customers. We are also reducing shrinkage through
increased use of analytics, and implementing best practices to higher risk
areas. For further details please refer to 'Build a mobile-first and service
orientated customer experience', above.
· GNFR optimisation - Our category managers with Group-wide
responsibilities and local procurement teams continue to optimise a c.£1.9bn
GNFR spend through over 220 projects, 70 of which each deliver more than
£0.25m of annualised savings.
· Supply and logistics - Kingfisher's supply and logistics teams
continued to work on distribution centre space reduction, network optimisation
and operational efficiency. Next to the significant distribution centre space
reductions in France (see 'France - on track to complete 'fixes' in H2'
above), major improvements were also realised in the UK, with the opening of a
new bulk distribution centre for B&Q and the automation of Screwfix's site
in Trentham.
· Overheads - Savings were realised across Group and banner head
offices, including through the expansion of the use of our shared service
centre in Krakow, Poland.
· Property - Completed 34 B&Q lease renegotiations over the
last 12 months, with an average net rent reduction of 19%, alongside improved
lease terms. We are seeing positive initial results from the five rightsized
stores from last year, and have plans to complete further rightsizings in H2.
For further details please refer to 'Test compact store concepts and adapt our
store footprint', above.
Over the course of the pandemic, we learnt multiple lessons about how to
significantly adjust our cost base during times of volatile sales. We
understand and prepare for a range of trading scenarios, with corresponding
plans to adjust our cost base quickly when we need to, including reducing
discretionary P&L spend and operating measures to reduce variable store
costs.
Inventory
Our priority over the last two years has been to secure inventory and improve
availability for our customers, amidst unprecedented global supply chain and
logistics challenges, as well as to improve the quality of our inventory. As
and when a more 'normalised' environment emerges, we believe there are
opportunities to unlock further efficiencies in our supply chain and inventory
management.
As described in the 'Supply and logistics' section, above, overall and 'best
seller' product availability has gradually improved over the last year and is
now back to pre-pandemic levels (since Q1). In the longer-term, our
initiatives to reduce same-store inventory include better ranging and
deployment (with a focus on further removing slow-moving inventory) and more
agile planning and forecasting. Completing our SAP roll-out and further
implementing and optimising our Group digital technology stack will support
these initiatives.
In constant currency, net inventory at the end of H1 increased by £449m to
£3,138m (H1 21/22: £2,730m at reported rates). 61% of the increase is
related to higher product purchase cost with an additional 7% driven by
additional stock to support our store expansion programme. The balance
includes proactive inventory purchases from Q4 21/22 to (i) rebuild product
availability, (ii) build seasonal and 'buffer' stock ahead of peak trading,
and (iii) secure lower cost stock. Net stock days increased by 19% YoY in H1,
and are stable versus H1 19/20. All our banners are deploying actions to
reduce inventory, including managing existing orders and optimising our
replenishment systems (e.g., re-adjusting for lower supplier lead-times and
lower security stock parameters).
Same-store net inventory* (in constant currency) increased by £417m (16%),
driven by higher cost of goods sold and our proactive inventory purchases from
Q4 last year. On a 3-year basis the increase in same-store inventory (in
constant currency) was £593m (24%), with net stock days 3% (4 days) higher
than H1 19/20 (excluding Russia).
Our inventory remains healthy, with stock provisioning rates below
pre-pandemic levels.
Sourcing
In sourcing and buying, we continue to deliver cost and operational
efficiencies by leveraging our Group scale. By using a value engineering
approach, we continue to deliver sourcing benefits on our large OEB product
base (45% of Group sales in H1 22/23), which helped to partly mitigate the
impact of cost price inflation during the year.
We continue to make progress on our sourcing diversification plan, by
increasing our 'near-sourcing' footprint and exploring dual sourcing where
possible. Our sourcing teams are also working closely with our OEB teams on
value engineering projects, including simplifying the design of products to
reduce per-unit manufacturing costs.
g) Lead the industry in Responsible Business practices
We are committed to leading our industry in responsible business practices.
Building on our strong Environmental, Social, and Governance (ESG)
credentials, our 'Powered by Kingfisher' strategy sets out four priority areas
for Responsible Business, where we can maximise our positive impact on the
lives of our customers, colleagues, communities and the planet.
Our priorities are underpinned by our commitment to our 'Responsible Business
Fundamentals'. These are the many issues and impacts we need to measure and
manage, to ensure we continue to operate responsibly across our business. We
have clear policies in each of these areas, including health and safety,
responsible sourcing, cyber security and data protection, and ethical conduct,
to ensure we take a consistent best practice approach across our banners.
Colleagues
Strong engagement to attract and retain colleagues
Our 80,000 colleagues are at the heart of our business and help our customers
make their home improvement plans a reality. As a global business with
colleagues in eight countries, we are proud of our cultural diversity and
believe this is a strength that is fundamental to the way we operate.
We believe that highly motivated, engaged colleagues not only give great
service to our customers, but are also more likely to stay and build their
careers with us. We heard from more colleagues in our engagement survey this
year (83%, up 4% compared to last year) and colleagues shared 317,000 comments
(up 10%). Our Employee Net Promoter Score (eNPS) is again significantly ahead
of the global retail benchmark (+6 points), putting us in the top 5% of the
global retail benchmark (compared to top 10% last year).
We invested to strengthen our employer brands, to ensure we can attract and
retain colleagues in increasingly competitive labour markets, especially at
store level. To recognise the contribution of our frontline teams and to
support colleagues with the cost of living, our annual pay review process was
focused on our store colleagues, with more significant pay increases being
awarded to these colleagues. We have also broadened colleague benefits across
the Group, including employee discounts across a range of household goods and
services, and financial wellbeing support. As a result of this and strong
engagement across the Group, our attrition levels and the time it takes to
hire new employees are either in line with, or ahead of, industry norms.
We continue to focus on diversity and inclusion because we know it makes us a
better business and a more innovative and engaged workforce. We are listening
to our colleagues and acting on the ideas from our affinity networks about how
we can build a more inclusive culture. This summer, we responded to colleague
feedback and worked in partnership with our affinity networks to improve our
UK and France family leave policy and launched a new gender expression and
identity guide. We also launched a 'What dads can do' campaign in Castorama
Poland aimed at reminding fathers of the benefits and support available to
them. Colleagues across the group celebrated PRIDE in June and Brico Dépôt
Iberia focused on driving awareness of safe spaces for the LGBTQ+ community
via a campaign which subverted typical health and safety signs with data about
LGBTQ+ discrimination.
We are also investing in inspiring opportunities for colleagues to learn and
grow with us. Colleagues completed nearly 600,000 hours of 'skills for life'
learning during H1, bringing the total number of hours completed since FY
19/20 to over 4.5 million.
We continue to invest in talent and capability to unlock further growth. As
part of our focus on creating new customer propositions, we have recruited in
key areas, in particular scaling digital, technology and data. To support the
growth of e-commerce sales, we have established new marketplace capability
through a combination of specialist hires and targeted upskilling, and have
expanded user experience (UX) capability to further build online customer
experience. We have established a new highly skilled team brought together
from across the Group to lead Screwfix France as we scale up in preparation
for our first store openings. In parallel, we continue to focus on head office
efficiencies, ensuring we align our resources to our strategic priorities.
Responsible Business priorities
We continue to make strong progress against our four Responsible Business
priorities:
Colleagues: Becoming a more inclusive company
· In FY 21/22 we reached 25.2% women in senior leadership and 37.7%
in management, an increase from 23.2% and 36.1% respectively versus FY 20/21.
We remain focused on meeting our targets of 35% women in senior leadership and
40% in management, by FY 25/26.
· Colleagues completed nearly 600,000 hours of 'skills for life'
learning during H1, bringing the total number of hours completed since FY
19/20 to over 4.5 million, on track to meet our target.
· We had 3,890 apprentices across the Group in FY 21/22.
Planet: Helping to tackle climate change and create more forests than we use
· In July 2022, we announced a new target to reach net-zero for our
operations (scope 1 and 2) by the end of 2040. This means we will reduce
absolute emissions by at least 90% against our FY 16/17 baseline, and
neutralise our residual emissions, in line with the requirements of the
Science Based Targets initiative (SBTi) Corporate Net-Zero Standard.
· Achieving our near-term 1.5°C aligned science-based scope 1 and
2 carbon reduction target (approved by the SBTi in 2021) is our first step
towards achieving net-zero carbon by FY 40/41.
· In July 2022 we established a Group Climate Committee, with the
primary purpose to agree and monitor the Company's approach to meeting its
emission reduction commitments for 2025 and 2040; to climate-related external
reporting, and to assessing and managing climate-related risks. The Committee
is chaired by our Group CEO.
· We are a founding member of the UN's Race to Zero Breakthroughs -
Retail Campaign (https://racetozero.unfccc.int/breakthroughs/) , a partnership
aiming to inspire more of the world's retailers to take action on climate
change. In FY 21/22, we reduced our carbon footprint for our own operations
(scope 1 and 2 emissions) by 24.5%, against a FY 16/17 base year. This showed
a strong underlying improvement over the previous two years (FY 19/20: 18.5%).
We remain on track to meet our 2025 target of a 37.8% reduction.
· Actions during H1 included further roll-out of LED lighting,
installing or retrofitting air source heat pumps into a further 65 Screwfix
stores in the UK, and installing photovoltaic (PV) panels and biomass boilers
at selected locations. As of 31 July 2022, over 300 of Screwfix's 821 stores
are heated with air source heat pumps.
· We buy electricity from zero carbon sources, supported by
Guarantee of Origin certificates. This now covers 100% of purchased
electricity for our operations in the UK, France, Poland, Iberia and Romania.
· Our 1.5°C aligned scope 3 target requires us to achieve a 40%
reduction (per £'million turnover) from purchased goods and services and use
of sold products by 2025, against a FY 17/18 base year. By the end of FY 21/22
we had reduced emissions from energy-using products by 1.4 million tonnes of
CO2e, versus FY 17/18. This takes account of a product's estimated lifetime
carbon emissions from energy use. This has reduced the intensity of our
emissions from the supply chain and customer use of products by 19.7%, meaning
we are on track to meet our 2025 target of a 40% reduction.
· Kingfisher has a strong heritage in sustainable forestry and the
responsible sourcing of wood. In line with our commitment to be 'forest
positive' by 2025:
- 87% of the wood and paper used in our products is responsibly
sourced (FY 20/21: 81%), including 100% of catalogue paper, putting us on
track to achieve our target of 100% by FY 25/26.
- As a founder member of the Rainforest Alliance's 'Forest Allies'
initiative, we continue to support forest projects in Indonesia, Peru,
Columbia, Guatemala and Cameroon, which will have a positive impact on
tropical forests and their communities, including over 7,000 people and over
300,000 hectares of forest.
Customers: Helping to make greener, healthier homes affordable
· In FY 21/22, £5.8bn of sales, representing 44% of Group sales
(FY 20/21: 42%), were from Sustainable Home Products (SHPs). This equates to a
doubling of our penetration since we established the programme in FY 11/12.
· These are products that either help our customers live more
sustainably (such as water-saving taps or loft insulation) or are sustainable
because of their input materials or how they are manufactured (for example,
FSC timber, peat-free compost or recycled plastic).
· In July we announced a new ambitious target for SHP sales to
reach 60% of Group sales by FY 25/26 (previous target 50% by FY 20/21). We are
also targeting 70% of OEB product sales to be from SHPs by FY 25/26 (FY 21/22:
55%).
· Sustainability is one of the five core design principles we use
in developing our OEB ranges and we remain focused on improving sustainability
performance. For example, we lead the market in moving towards 100% peat-free
compost, we have removed solvents from further paint lines, integrated
recycled plastic into more furniture and tools, and increased the longevity of
some hand tool ranges.
· We also see considerable potential across all our markets as the
'green homes' agenda accelerates, in particular in the UK and France, where
the governments have made 'net zero' commitments and are exploring
opportunities to further increase engagement with DIY and trade customers on
this agenda. For example:
- In FY 21/22, Kingfisher derived 10% of Group sales from energy and
water-saving products. We are very well placed in energy efficiency categories
such as loft insulation, LED lighting, underfloor heating and electric
radiators, and are exploring other product solutions.
- Screwfix is selling photovoltaic (PV) panels and air-source heat
pumps to the trade and is exploring further options in this market.
- In the coming weeks, B&Q will launch an innovative end-to-end
solution to help customers create a personalised energy efficiency action plan
for their homes, and then access the relevant products and services via
B&Q and its partners to take action. Brico Dépôt France will also launch
a similar solution in the coming weeks.
- Following its launch in early 2021, Castorama France and Brico
Dépôt France have supported the French government's 'MaPrimeRénov' grant
scheme for energy-efficient projects in customers' homes. The programme has
gained significant traction in France.
Communities: Fighting to fix bad housing
· In FY 21/22, we invested £4m in our communities, and our
colleagues and customers raised an additional £2.8m. We reached over 800,000
people through our charitable partnerships and banner Foundations.
· This brings our total to over 1.5m people helped since FY 16/17,
putting us on track to achieve our target to help 2m people by FY 25/26.
· We established charitable Foundations in all our banners and
extended our partnerships with the national charities, Shelter and Macmillan
in the UK, La Fondation Abbé Pierre in France, and Habitat for Humanity in
Poland and Romania.
· Our banners supported a range of local projects during FY 21/22,
such as the Bricobus run by Compagnons Bâtisseurs in France, which reached
2,000 people in deprived rural regions with free DIY training and advice, and
Meta Pomoc in Poland, supporting young people leaving the care system to
improve their housing.
· Kingfisher responded rapidly to the Ukraine crisis, with all our
retails banners actively fundraising and seeking donations across their
markets. We donated c.£0.5m to help organisations such as the International
Red Cross and the UNHCR with their relief efforts. This included matched
funding for colleague donations to the Red Cross Ukraine Crisis Appeal.
· In late August, torrential rains flooded Pakistan, impacting
around 33 million people. We have donated to the International Red Cross Red
Crescent Movement to support their humanitarian efforts. The Pakistan Red
Crescent is working hard to reach 300,000 people with safe drinking water,
tents, health support and other aid.
Governance and Reporting
Our Responsible Business Committee (RBC) is a sub-committee of Kingfisher's
Board. It supports the governance of Responsible Business and monitors
performance against our priorities. The RBC is chaired by Sophie Gasperment, a
non-executive director (NED) of the Board, and includes a further NED, our
Group CEO, and other members of the Group Executive.
This year, we have integrated Responsible Business measures into our long-term
incentive plan (known as the Kingfisher Performance Share Plan), which is
granted to members of our senior leadership team. The performance conditions
attached to the vesting of awards include 25% weighting on ESG measures. More
information on this is provided in our 2021/22 Annual Report and Accounts.
In May 2021, we entered into a new £550m sustainability-linked revolving
credit facility (RCF), which enables Kingfisher to benefit from a lower
interest rate when we deliver on ambitious sustainability and community-based
targets under the Group's Responsible Business plan. Kingfisher achieved its
FY 21/22 targets.
In July 2022 we published our FY 21/22 Responsible Business Report aligned
with the Sustainability Accounting Standards Board (SASB) standards for
Multiline and Speciality Retailers and Distributors, and the Global Reporting
Initiative (GRI). Furthermore, we have been working to improve our
understanding of the financial impacts of climate-related risks and
opportunities, in line with the approach set out by the Task Force on
Climate-related Financial Disclosures (TCFD). Further information is provided
in our 2021/22 Annual Report and Accounts.
We continue to rank highly in external benchmarks and indices, including:
· MSCI: We rank as a 'Leader', having received the highest-possible
'AAA' score, which was achieved by only 4% of companies in the Retail -
Consumer Discretionary sector.
· CDP climate change: We continue to achieve a leadership score of
'A-'. We are amongst 25% of companies in our sector globally that reached
'Leadership' level and we score higher than the average discretionary retail
performance of 'B-'.
· Sustainalytics: We rank first out of 39 in home improvement
retail and third out of 460 in the wider retailing industry.
· Workforce Disclosure Initiative: We received a disclosure score
of 71%, which is ahead of the average consumer discretionary sector and
average disclosure score (all companies) of 68%.
· ISS ESG Corporate Rating: We achieved a 'C+' rating. This is
supported by our 'Prime' status, which is given to companies that are
perceived to be sustainability leaders in their industry.
· FTSE4Good: Kingfisher is included in this index, with a rating of
4.6 out of 5 ('Strong' performance).
For more information on our Responsible Business strategy, performance and
governance, please visit the Responsible Business section of our website at
www.kingfisher.com (http://www.kingfisher.com) . You can read our 2021/22
Responsible Business report here
(https://www.kingfisher.com/en/responsible-business/responsibility-report-.html)
.
5. Clear financial priorities and capital allocation framework
Group financial priorities
Since September 2019, our 'Powered by Kingfisher' strategic plan has delivered
sales and profit growth, as well as over £900m of returns to shareholders
through dividends and share buybacks. We are also making progress against our
financial priorities over the medium term. These are to:
· Prioritise top line growth and grow sales ahead of market:
- Clear strategy, actions and investments to drive market share
growth
- Focused on store and online customer satisfaction
- Operating in an attractive market, with new longer-term trends
supporting the industry
· Grow adjusted pre-tax profit in line with sales and gradually
faster than sales over time:
- Focused on driving scale benefits and cost improvements, enabling
us to accelerate investment in top line growth and achieve an improved
adjusted pre-tax profit margin %* over time
· Generate strong free cash flow to underpin investment and
shareholder returns:
- Drive inventory self-help, which presents a significant
opportunity over the medium term
- Disciplined approach to capital expenditure allocation, with
target gross capex of c.3.0-3.5% of total sales per annum, on average
- Progressive, sustainable dividend policy, with target dividend
cover* of 2.25-2.75x
- Committed to an efficient capital structure, while maintaining a
prudent position in times of uncertainty
- Scope for surplus capital returns via share buybacks or special
dividends
Capital allocation
Last year, we updated our capital allocation policy to reflect the investment
requirements and ambition of 'Powered by Kingfisher', while maintaining a
strong balance sheet. 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 compelling organic
or strategic/bolt-on inorganic growth opportunities that strengthen and
accelerate our strategy. Over this and the next financial year, we expect to
be towards the upper end of the gross capex target range set out above, as we
make investments for growth.
To maintain a solid investment grade credit rating, our target is a maximum of
c.2.0 times net debt to EBITDA on an IFRS 16 basis, 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 July 2022
includes an undrawn RCF of £550m and cash of £479m (net of bank overdrafts).
In March 2021, the Board announced a target ordinary dividend cover range of
2.25 to 2.75 times, based on adjusted basic earnings per share. We aim to grow
the ordinary dividend progressively over time.
If surplus capital remains after having achieved all the above objectives, the
Board will periodically evaluate returning surplus capital to shareholders via
a share buyback programme or special dividends.
Interim ordinary dividend
The Board has declared an interim dividend of 3.80 pence per share, flat
versus the H1 21/22 interim dividend of 3.80 pence per share.
The interim dividend will be paid on 11 November 2022 to shareholders on the
register at close of business on 7 October 2022. A dividend reinvestment plan
(DRIP) is available to shareholders who would prefer to invest their dividends
in the Company's shares. The shares will go ex-dividend on 6 October 2022. The
last date for receipt of DRIP elections is 21 October 2022.
Additional £300m share buyback programme
In September 2021, the Board announced the return of £300m of surplus capital
via a share buyback programme. The programme completed in April 2022.
In line with our capital allocation policy described above, in May 2022 the
Board determined that a further £300m of surplus capital was available to
return to shareholders, via a share buyback programme. The first £75m tranche
of this programme completed in July, and the second £75m tranche is expected
to complete by next month.
Section 3: Trading review by division
Note: all commentary below is in constant currency.
UK & IRELAND
£m 2022/23 2021/22 % Reported Change % Constant % LFL % 3-year LFL Change
Currency Change
Change
B&Q 2,082 2,378 (12.5)% (12.4)% (13.0)% +16.7%
Screwfix 1,139 1,192 (4.4)% (4.4)% (8.8)% +14.4%
Total sales 3,221 3,570 (9.8)% (9.8)% (11.6)% +16.0%
Retail profit 339 579 (41.3)% (41.3)%
Retail profit margin % 10.5% 16.2% (570)bps (570)bps
Kingfisher UK & Ireland sales decreased by 9.8% (LFL -11.6%) to £3,221m,
reflecting very strong prior year comparatives. 3-year LFL sales were up 16.0%
in H1. The LFL sales trend improved from -15.8% in Q1 to -7.1% in Q2,
supported by resilient sales from both DIY and DIFM/trade categories and
benefiting from more favourable weather. Our banners continued to improve
their competitive position in the UK home improvement market, and engagement
with new and existing customers remained strong, with both store and online
NPS improving on last year. Gross margin % decreased by 200 basis points,
reflecting 'normalised' promotional activity versus the prior year, one-off
logistics spend to secure and manage seasonal and 'buffer' stock, and mix
impacts. Mix impacts are the result of a lower YoY share (versus Screwfix) of
B&Q's higher gross margin % revenues given very strong prior year sales;
unfavourable B&Q category mix between lower margin building & joinery
and EPHC (electricals, plumbing, heating & cooling) and higher margin
surface & décor categories, and the success of the kitchen and bathroom
& storage categories that attracts higher fulfilment costs.
Retail profit decreased by 41.3% to £339m (H1 21/22: £579m; H1 19/20:
£279m), due to the exceptionally higher sales and gross margin % in H1 last
year. Operating costs increased by 3.9%, reflecting higher costs associated
with 88 net new store openings (YoY), the normalisation of COVID-related
underspend last year, and operating cost inflation including higher utility
charges. The increase in operating costs was partially offset by lower staff
costs and cost reductions achieved as part of our strategic cost reduction
programme. Retail profit margin % decreased by 570 basis points to 10.5% (H1
21/22: 16.2%; H1 19/20: 10.5%).
B&Q total sales decreased by 12.4% (LFL -13.0%) to £2,082m as the
business lapped very strong prior year comparatives. 3-year LFL sales were up
16.7% in H1. The business has achieved good growth across all categories on a
3-year basis, in particular building & joinery and outdoor. In H1 B&Q
saw resilient sales in its kitchen and bathroom & storage categories,
driven by enhancements in the overall customer journey from design through to
installation. LFL sales of weather-related categories decreased by 18%
(increase of 23% on a 3-year LFL basis), while LFL sales of
non-weather-related categories, including showroom, decreased by 11% (increase
of 14% on a 3-year LFL basis). B&Q's total e-commerce sales (including
marketplace gross sales) decreased by 17% YoY, largely reflecting strong
online trading in the prior year due to the COVID lockdowns in the UK.
B&Q's total e-commerce sales were up 149% on a 3-year basis, with
e-commerce sales penetration of 11% (H1 21/22: 11%; H1 19/20: 5%). B&Q's
marketplace has seen good growth since its launch in March, reaching a
penetration of 8% in August 2022 (i.e., B&Q's marketplace gross sales
divided by B&Q's total e-commerce sales). B&Q opened one new compact
store in H1, bringing its total to 313 stores in the UK and Ireland.
B&Q's trade-focused banner, TradePoint, continues to perform ahead of
expectations as demand from trade customers remains robust. The business
remains a significant part of B&Q at 21% of its sales (H1 21/22: 19%). LFL
sales for TradePoint outperformed the rest of B&Q, with LFL sales down
just 3.1% in H1 and 3-year LFL sales up 34%, as well as low single-digit
growth in Q2 despite strong comparatives. Over the last two years, TradePoint
has made significant enhancements to its customer proposition, including the
addition of more trade-specific product ranges and services (for example, tool
hire), trade-only deals and campaigns, and enhancements to its loyalty
programme. Strong engagement with trade customers has continued in H1, with
the recruitment and retention of members remaining a key area of focus for the
business. TradePoint continues to increase awareness of its digital offer
through in-store advertising, and is on track to launch a dedicated app in
2023.
Screwfix total sales decreased by 4.4% (LFL -8.8%) to £1,139m, again
reflecting very strong prior year comparatives. 3-year LFL sales were up 14.4%
in H1. Screwfix grew its market share in H1, with resilient sales from trade
customers throughout the period. Its 3-year LFL performance decreased somewhat
from Q1 to Q2, with lower YoY DIY revenues linked to very strong demand in the
prior year. Screwfix's e-commerce sales decreased by 17% YoY, largely
reflecting strong online trading in the prior year due to the COVID lockdowns
in the UK. E-commerce sales were up 144% on a 3-year basis, with e-commerce
sales penetration of 60% (H1 21/22: 70%; H1 19/20: 32%). The business has
significantly strengthened its digital proposition, with its new mobile app
(launched in February 2021) having been downloaded 2.6m times, with 30x faster
search results and 6% higher conversion versus the Screwfix website. The app
has enabled the rollout of Screwfix 'Sprint', the within one-hour home
delivery service, currently available from over 300 stores, covering c.45% of
UK postcodes. Further roll-out is planned in H2.
Space growth contributed c.4% to total sales. In H1, Screwfix opened 31 new
stores (including three in Ireland), bringing the total to 821 as of 31 July
2022. The business is on track to reach its goal of over 80 new stores this
financial year, and more than 1,000 stores in the medium term in the UK &
Ireland.
As part of its international expansion plans, Screwfix launched as a pure-play
online retailer in France in April 2021. Results have been very encouraging,
with strong web traffic and conversion rates, and growing brand awareness
across the country. The business is making good progress with building a new
supply chain, with its first distribution centre now open, and a strong
pipeline of local and national vendors selected and onboarded. In addition,
Screwfix is on track to deliver a dedicated IT system for its operations in
France. The business expects to open its first stores in France within a few
weeks from now, with a meaningful step-up in roll-out targeted in 2023. The
results for Screwfix International are captured in 'Other International' - see
below for further information.
FRANCE
£m 2022/23 2021/22 % Reported Change % Constant % LFL % 3-year LFL Change
Currency Change
Change
Castorama 1,207 1,237 (2.5)% (0.4)% (0.5)% +13.4%
Brico Dépôt 1,118 1,200 (6.8)% (4.9)% (5.5)% +13.8%
Total sales 2,325 2,437 (4.6)% (2.6)% (3.0)% +13.6%
Retail profit 129 129 +0.3% +2.4%
Retail profit margin % 5.6% 5.3% +30bps +30bps
Kingfisher France sales decreased by 2.6% (LFL -3.0%) to £2,325m, reflecting
resilient sales from both DIY and DIFM/trade customers, despite strong prior
year comparatives. 3-year LFL sales were up 13.6% in H1. The LFL sales trend
improved from -3.7% in Q1 to -2.3% in Q2, driven by an improving sales trend
at Brico Dépôt. We continued to improve our competitive position in the
French home improvement market. In H1 22/23, Kingfisher France outperformed
the market (based on Banque de France data), driven by the outperformance of
Castorama which grew three percentage points ahead of the market. Gross margin
% decreased by 30 basis points, reflecting category mix impacts and
'normalised' promotional activity versus the prior year, partially offset by
lower logistics costs. France will complete its distribution centre space
reductions this month, closing a further 8% of space and bringing its
cumulative reduction to a c.27% decrease in square metres versus two years
ago.
Retail profit increased by 2.4% to £129m (H1 21/22: £129m; H1 19/20:
£112m), with lower gross profit YoY more than offset by lower operating
costs. Operating costs decreased by 4.5% due to lower staff costs (including
the phasing of store staff incentives), lower store property costs, and cost
reductions achieved as part of our strategic cost reduction programme. Retail
profit margin % improved 30 basis points to 5.6% (H1 21/22: 5.3%; H1 19/20:
5.2%).
Castorama total sales decreased by 0.4% (LFL -0.5%) to £1,207m, reflecting
resilient sales despite strong prior year comparatives. 3-year LFL sales were
up 13.4%. The business has achieved strong growth across its outdoor, building
& joinery and kitchen categories on a 3-year basis, with each growing by
over 20%. In H1 Castorama saw positive YoY sales growth in its building &
joinery, kitchen, bathroom & storage and EPHC categories, the latter
driven by the unusual heatwave in July. LFL sales of weather-related
categories decreased by 2% (increase of 22% on a 3-year LFL basis), while LFL
sales of non-weather-related categories, including showroom, were flat YoY
(increase of 11% on a 3-year LFL basis). Castorama's e-commerce sales
decreased by 38% YoY, largely reflecting strong online trading in the prior
year due to COVID-related restrictions in France (which led to some temporary
store and non-essential range closures throughout the first quarter and part
of the second quarter of 2021). Castorama's e-commerce sales were up 226% on a
3-year basis, with e-commerce sales penetration of 5% (H1 21/22: 8%; H1 19/20:
2%). Castorama opened two new stores in H1, its first high street compact
store tests in Paris. Castorama now has 95 stores in total in France.
Brico Dépôt total sales decreased by 4.9% (LFL -5.5%) to £1,118m, again
reflecting resilient sales levels despite strong prior year comparatives.
3-year LFL sales were up 13.8%. The business has achieved strong growth across
its outdoor and building & joinery categories on a 3-year basis, with each
growing by over 25%. Brico Dépôt continues to drive increased customer
engagement and improved price perception, as the business focuses on
strengthening its discounter credentials and further differentiating its
ranges. Brico Dépôt's e-commerce sales decreased by 34% YoY, again
reflecting strong online trading in the prior year. Brico Dépôt's e-commerce
sales were up 138% on a 3-year basis, with e-commerce sales penetration of 4%
(H1 21/22: 6%; H1 19/20: 2%).
OTHER INTERNATIONAL
2022/23 2021/22 % Reported Change % Constant % LFL % 3-year LFL Change
Currency Change
Change
Sales (£m)
Poland 913 743 +22.9% +29.0% +25.9% +23.8%
Iberia 196 196 +0.2% +2.3% +2.3% +15.6%
Romania(±) 145 152 (4.4)% (1.8)% +8.9% +43.6%
Other(±±) 9 3 n/a n/a n/a n/a
Other International 1,263 1,094 +15.4% +20.2% +19.5% +24.3%
Retail profit (£m)
Poland 94 58 +58.6% +66.4%
Iberia 6 11 (41.9)% (40.7)%
Romania(±) (4) (6) +25.3% +23.3%
Other(±±) (13) (5) n/a n/a
Turkey (50% JV) 4 1 n/a n/a
Other International 87 59 +43.7% +52.1%
Retail profit margin %
Poland 10.3% 8.0% +230bps +230bps
Other International 6.8% 5.5% +130bps +140bps
(±) Kingfisher's subsidiary in Romania has historically prepared its
financial statements to 31 December. In the prior year (FY 21/22), Romania
migrated to Kingfisher's financial reporting calendar (year ended 31 January).
Its sales and retail loss presented in H1 21/22 therefore included one
additional month of results (July 2021) in order to facilitate the alignment
to Kingfisher's financial reporting calendar. Reported and constant currency
variances for Romania's retail loss are for February to July 2022 (compared
against January to July 2021), whilst LFL and 3-year LFL sales growth for
Romania compares equivalent periods in the current and prior years.
(±±) 'Other' consists of the consolidated results of NeedHelp (acquired in
November 2020), Screwfix International (launched online in France in April
2021), and results from franchise agreements.
Other International total sales increased by 20.2% (LFL +19.5%) to £1,263m,
with 3-year LFL sales up 24.3%, driven by growth in all key geographies.
Retail profit increased by 52% to £87m (H1 21/22: £59m; H1 19/20: £63m),
with improved performances in Poland, Romania and Turkey partially offset by a
lower retail profit in Iberia and losses incurred in 'Other' operations. The
retail profit margin % increased by 140 basis points to 6.8% (H1 21/22: 5.5%;
H1 19/20: 5.3%).
Poland total sales increased by 29.0% (LFL +25.9%) to £913m, supported by
strong market share gains, notwithstanding weak prior year comparatives in Q1
due to the COVID-related temporary closure of all Castorama stores (between 27
March and 3 May 2021). 3-year LFL sales were up 23.8% in H1. The business has
achieved very strong growth across all categories on a 3-year basis, with
building & joinery, kitchen and outdoor all growing by over 30%. The
performance of the OEB kitchen range in Poland has demonstrated Kingfisher's
ability to capture a new market opportunity with the right combination of
offer, price and service, delivering over 90% LFL sales growth in H1 on a
3-year basis and up by over 60% YoY. LFL sales of weather-related categories
increased by 26% (increase of 33% on a 3-year LFL basis) while LFL sales of
non-weather-related categories, including showroom, increased by 26% (increase
of 22% on a 3-year LFL basis). Poland's e-commerce sales decreased by 3% YoY,
impacted by the temporary store closures in Q1 last year. Q2 e-commerce sales
in Poland increased by 19% YoY. Poland's e-commerce sales were up 330% on a
3-year basis, with e-commerce sales penetration of 5% (H1 21/22: 7%; H1 19/20:
2%). Gross margin % increased by 10 basis points, largely reflecting
favourable mix impacts (category and channel mix). Retail profit increased by
66.4% to £94m (H1 21/22: £58m; H1 19/20: £81m) with strong growth in gross
profit partially offset by an increase in operating costs. Operating costs
increased by 18.1%, reflecting space growth and new store opening costs,
higher marketing costs, staff and operating cost inflation, as well as
reflecting the reversal of one-off cost savings in H1 21/22 related to the
period of temporary store closures. The increase in operating costs was
partially offset by cost reductions achieved as part of our strategic cost
reduction programme. Retail profit margin % increased by 230 basis points to
10.3% (H1 21/22: 8.0%; H1 19/20: 10.8%).
Space growth contributed c.3% to total sales. Castorama opened three new
stores in H1, including two big-boxes and one compact store (a small retail
park store concept test, trading under the Castorama Smart banner), bringing
its total to 93 stores in Poland. In August, the business opened its first 500
sqm concept store in Poland, in Warsaw, under the Castorama Express banner.
Iberia total sales increased by 2.3% (LFL +2.3%) to £196m, reflecting
resilient sales against strong prior year comparatives, though impacted by
abnormally cold and wet weather during Q1. LFL sales growth improved in Q2 to
+4.4%. 3-year LFL sales were up 15.6% in H1. The business has achieved strong
growth in most of its categories on a 3-year basis, with building &
joinery, EPHC, kitchen, surfaces & décor and outdoor all growing by
double-digit percentages. Retail profit decreased to £6m from £11m (H1
19/20: £2m), reflecting a lower gross margin % and an increase in operating
costs of 2.0%.
Romania total sales decreased by 1.8% to £145m, reflecting the inclusion of
one additional month of sales in the prior year comparative. On an LFL basis
sales growth was +8.9%, reflecting strong YoY performances in its building
& joinery, kitchen, surfaces & décor and outdoor categories. This was
despite the impact of COVID-related trading restrictions earlier in the year
(lifted in March 2022). Growth in gross profit was partially offset by an
increase in operating costs of 4.5%, mainly driven by staff costs and
inflation. As a result, the business reduced its retail loss by 23.3% to £4m
(H1 21/22: £6m retail loss; H1 19/20: £12m retail loss). On a comparable
basis, excluding losses incurred in the month of January 2021, Romania's
retail loss increased by 3.6% YoY.
In Turkey, Kingfisher's 50% joint venture, Koçtaş, continues to grow
successfully in a challenging economy. The business contributed £4m of retail
profit in the period (H1 21/22: £1m; H1 19/20 £3m), benefiting from strong
customer demand in H1, partly due to the expectation of higher inflation. The
business recently opened its 300(th) store, on its way to a target of over 500
stores in 2023.
'Other' consists of the consolidated results of NeedHelp, Screwfix
International, and franchise agreements. Due to these businesses being in
their early investment phase, a combined retail loss of £13m was incurred as
they scale up for growth. In November 2020, Kingfisher acquired NeedHelp, one
of Europe's leading home improvement services marketplaces. As noted in the UK
& Ireland commentary above, Screwfix launched in France as a pure-play
online retailer in April 2021 with very encouraging results, and expects to
open its first stores in France soon. Earlier this year we opened our first
franchise store under the B&Q banner in the Middle East, with a further
store opening in May. The stores and support office functions are fully
operated and staffed by the Al-Futtaim Group.
RETAIL BANNER EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area((1))
(FTE) numbers at 31 July 2022 (000s m(2))
at 31 July 2022 at 31 July 2022
B&Q 17,235 313 2,211
Screwfix 9,225 821 52
UK & Ireland 26,460 1,134 2,263
Castorama 11,683 95 1,156
Brico Dépôt 8,636 123 862
France 20,319 218 2,018
Poland 12,486 93 797
Iberia 2,038 31 195
Romania 2,724 35 253
Other((2)) 96 - -
Other International 17,344 159 1,245
Total 64,123 1,511 5,526
((1)) Screwfix sales area relates to the front of counter area of an outlet.
((2)) 'Other' consists of NeedHelp, Screwfix International, and franchising.
Section 4: FY 2022/23 Technical guidance
New guidance, or significant updates to our previous guidance, are noted below
in italics.
Please refer to Section 7 for further details regarding forward-looking
statements.
Income statement
· Space
- Net space growth to impact total sales by c.+1.5%, largely from
Screwfix and Poland
· Gross margin %
- In line with pre-pandemic level (FY 19/20: 37.0%)
· New businesses
- 'Other' retail losses of c.£30m (FY 21/22: £10m) (previous
guidance c.£20m, with increase driven by accelerated investment in Screwfix
France). 'Other' consists of the consolidated results of NeedHelp, Screwfix
International, and franchise agreements, recorded within the 'Other
International' division
- Retail loss of c.£5m in relation to investment in B&Q's
e-commerce marketplace, recorded within the results of B&Q in the 'UK
& Ireland' division
· Central costs
- Broadly flat YoY (FY 21/22: £60m)
· Net finance costs
- Decrease by c.£20m mainly as a result of lower lease liability
interest rate (FY 21/22: £137m) (previous guidance decrease by c.£15m)
· Adjusted pre-tax profit
- Full year adjusted pre-tax profit((1)) in the range of c.£730m to
£770m (previous guidance c.£770m)
· Tax rate
- Group adjusted effective tax rate* of c.22%((2)) (FY 21/22: 22%)
Balance sheet and cash flow
· Inventory - anticipate reduction of stock levels in H2 22/23
related to sell-through of a large part of 'buffer' stock previously held to
protect product availability
· Capital expenditure - targeting gross capex of c.3.5% of total
sales (FY 21/22: £397m; c.3.0% of total sales)
· Tax - in February 2022, a payment of €40m (c.£34m) was made to
the French tax authorities with regards to a historic tax liability. The
amount was fully provided for in prior periods
· Share buybacks - c.£325m outflow for share buybacks (c.£145m
for the first £300m programme completed in April, and a further c.£180m
related to the second £300m programme)
· Dividends - c.£246m outflow for dividends (£172m related to the
FY 21/22 final dividend of 8.60p, and c.£74m related to the FY 22/23 interim
dividend of 3.80p). For the total dividend in respect of FY 22/23, our
dividend policy target cover range remains 2.25 to 2.75 times, based on
adjusted basic earnings per share
((1)) Guidance assumes current exchange rates
((2)) Subject to the blend of profit within the Group's various jurisdictions
Section 5: H1 2022/23 Financial review
A summary of the reported financial results for the six months ended 31 July
2022 is set out below.
Financial summary % Total Change % Total Change % LFL Change
2022/23 2021/22 Reported Constant currency Constant currency
Sales £6,809m £7,101m (4.1)% (2.8)% (4.1)%
Gross profit £2,496m £2,697m (7.4)% (6.3)%
Gross margin % 36.7% 38.0% (130)bps (130)bps
Operating profit £531m £747m (29.1)%
Statutory pre-tax profit £474m £677m (30.0)%
Statutory post-tax profit £373m £556m (32.9)%
Statutory basic EPS 18.6p 26.4p (29.8)%
Net (decrease)/increase in cash((1)) £(329)m £444m n/a
Interim dividend 3.80p 3.80p -
Adjusted metrics
Retail profit £555m £767m (27.7)% (27.1)%
Retail profit margin % 8.2% 10.8% (260)bps (270)bps
Adjusted pre-tax profit £472m £669m (29.5)%
Adjusted pre-tax profit margin % 6.9% 9.4% (250)bps
Adjusted post-tax profit £368m £525m (29.7)%
Adjusted basic EPS 18.3p 24.9p (26.6)%
Free cash flow £104m £723m (85.6)%
Net debt((2)) £(1,848)m £(908)m n/a
((1)) Net (decrease)/increase in cash and cash equivalents and bank
overdrafts.
((2)) Net debt includes c.£2.3bn lease liabilities under IFRS 16 in H1 22/23
(H1 21/22: c.£2.3bn).
Total sales decreased by 2.8% on a constant currency basis, to £6,809m,
reflecting resilient sales across both retail and trade channels despite
strong prior year comparatives. Sales were lower in the UK & Ireland,
France and Romania (the latter due to the alignment to Kingfisher's financial
reporting calendar last year), partially offset by positive YoY sales growth
in Poland and Iberia. On a reported basis, which includes the impact of
exchange rates, total sales decreased by 4.1%.
LFL sales decreased by 4.1%, which excludes the sales impact from a net
increase in space of +1.3%, driven by store openings by Screwfix in the UK
& Ireland, and Castorama in Poland. During H1, we opened 37 new stores
(including 29 stores in the UK, three in Ireland, two in France and three in
Poland).
Gross margin % decreased by 130 basis points on a constant currency basis,
reflecting 'normalised' promotional activity versus the prior year, one-off
logistics spend to secure and manage seasonal and 'buffer' stock, and mix
impacts. Mix impacts are the result of a lower YoY share (versus other
banners) of B&Q's higher gross margin % revenues given very strong prior
year sales, and unfavourable category mix between lower margin building &
joinery and EPHC (electricals, plumbing, heating & cooling) and higher
margin surface & décor categories. On a reported basis, gross margin %
also decreased by 130 basis points. Group gross profit decreased by 6.3% in
constant currency.
Reported retail profit decreased by 27.7% including £6m of unfavourable
foreign exchange movement on translating foreign currency results into
sterling. In constant currency, retail profit decreased by 27.1%, largely
reflecting very strong prior year comparatives in the UK & Ireland which
was partially offset by strong retail profit growth in Poland. Operating costs
increased by 2.1% on a constant currency basis, largely reflecting higher
costs associated with space growth and new store openings, operating cost
inflation, and the reversal of one-off cost savings that were achieved in H1
21/22 due to COVID-related restrictions in our markets (e.g., advertising
& marketing and travel costs). The increase in operating costs was
partially offset by lower staff costs and cost reductions achieved as part of
our strategic cost reduction programme. The Group's retail profit margin %
decreased by 260 basis points to 8.2% (H1 21/22: 10.8%; H1 19/20: 7.6%).
Adjusted pre-tax profit down 29.5% to £472m (H1 21/22: £669m; H1 19/20:
£337m), reflecting lower retail profit, partially offset by lower net finance
costs largely as a result of lease renewals and regears. Adjusted pre-tax
profit margin % decreased by 250 basis points to 6.9% (H1 21/22: 9.4%; H1
19/20: 5.6%).
Statutory pre-tax profit, which includes adjusting items, decreased by 30.0%
to £474m. This reflects lower operating profit, partially offset by lower net
finance costs.
A reconciliation from the adjusted basis to the statutory basis for pre-tax
profit is set out below:
2022/23 2021/22 Increase/ (decrease)
£m £m
Retail profit (constant currency) 555 761 (27.1)%
Impact of exchange rates - 6 n/a
Retail profit (reported) 555 767 (27.7)%
Central costs (26) (27) n/a
Share of interest and tax of joint ventures & associates - (1) n/a
Net finance costs (57) (70) n/a
Adjusted pre-tax profit 472 669 (29.5)%
Adjusting items before tax 2 8 n/a
Statutory pre-tax profit 474 677 (30.0)%
Net finance costs of £57m (H1 21/22: £70m) consist principally of interest
on IFRS 16 lease liabilities. Net finance costs decreased due to lower
interest on lease liabilities and debt repayments.
Adjusting items after tax were a gain of £5m (H1 21/22: gain of £31m), as
detailed below:
2022/23 2021/22
£m £m
Gain/(charge) Gain/(charge)
Release of France and other restructuring provisions 1 -
Release of France uncertain operating tax position - 7
Property gains 1 1
Adjusting items before tax 2 8
Prior year and other adjusting tax items 3 23
Adjusting items after tax 5 31
Current year adjusting items include a £1m gain principally arising due to
savings on costs relating to legacy store closure programmes in France, as
compared with the original restructuring provisions recognised.
A gain of £1m was recorded on the exit of one property in the UK.
Prior year and other adjusting tax items relate principally to the impact on
deferred tax balances of the enacted future increase in the UK tax rate. Refer
to note 7 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 22% (H1 21/22: 22%). The adjusted ETR is consistent with the prior
year rate with small increases relating to the effective impact of permanent
differences on lower profits and the higher share of profits in France, offset
by reductions for the fall in French corporate income tax rate.
The statutory effective tax rate includes the impact of adjusting items
(including prior year tax items). The impact of these result in a statutory
effective tax rate of 21%.
Pre-tax profit Pre-tax profit
£m Tax 2022/23 £m Tax 2021/22
£m % £m %
Adjusted effective tax rate 472 (104) 22% 669 (144) 22%
Adjusting items 2 3 8 23
Statutory effective tax rate 474 (101) 21% 677 (121) 18%
On 8 June 2022, the General Court of the European Union dismissed several of
the appeals, including the UK Government's, to annul the European Commission's
2019 state aid decision concerning the UK's controlled foreign company tax
rules. It is expected that the decision of the General Court will be appealed
to the European Court of Justice.
In FY 21/22 Kingfisher paid £64m (including interest) to HM Revenue &
Customs in relation to the state aid decision. The Group continues to
recognise this amount as a non-current tax asset based on its assessment that
its appeal will ultimately be successful. Refer to note 17 of the condensed
financial statements.
In February 2022, a payment of €40m (c.£34m) was made to the French tax
authorities relating to a historic tax liability. This amount was fully
provided for in prior periods.
The statutory tax rates applicable to this financial year and the expected
statutory tax rates for next year in our main jurisdictions are as follows:
Statutory tax rate Statutory tax rate
2023/24 2022/23
UK 24% 19%
France 26% 26%
Poland 19% 19%
Adjusted basic earnings per share decreased by 26.6% to 18.3p (H1 21/22:
24.9p), which excludes the impact of adjusting items. Basic earnings per share
decreased by 29.8% to 18.6p (H1 21/22: 26.4p) as set out below:
2022/23 2021/22
Earnings((1)) EPS Earnings((1)) EPS
£m pence £m pence
Adjusted basic earnings per share 368 18.3 525 24.9
Adjusting items before tax 2 0.1 8 0.4
Prior year and other adjusting tax items 3 0.2 23 1.1
Basic earnings per share 373 18.6 556 26.4
((1)) Earnings figures presented reconcile adjusted post-tax profits to
statutory post-tax profits.
Dividends
The Board has declared an interim dividend of 3.80 pence per share, flat
versus the H1 21/22 interim dividend of 3.80 pence per share.
The interim dividend will be paid on 11 November 2022 to shareholders on the
register at close of business on 7 October 2022. A dividend reinvestment plan
(DRIP) is available to shareholders who would prefer to invest their dividends
in the Company's shares. The shares will go ex-dividend on 6 October 2022. The
last date for receipt of DRIP elections is 21 October 2022.
For further details on our dividend policy please refer to 'Clear financial
priorities and capital allocation framework', within Section 2.
Management of balance sheet and liquidity risk and financing
Management of cash and debt facilities
Kingfisher regularly reviews the level of cash and debt facilities required to
fund its activities. This involves preparing a prudent cash flow forecast for
the medium term, determining the level of debt facilities required to fund the
business, planning for repayment of debt at its maturity, and identifying an
appropriate amount of headroom to provide a reserve against unexpected
outflows and/or unexpected impacts to cash inflows. To retain financial
flexibility, we aim to maintain strong liquidity headroom (including cash and
cash equivalents, and committed debt facilities), which is currently set at a
minimum of £800m.
Net debt to EBITDA
As of 31 July 2022, the Group had £1.8bn (H1 21/22: £0.9bn) of net debt on
its balance sheet including £2.3bn (H1 21/22: £2.3bn) of total lease
liabilities.
The ratio of the Group's net debt to EBITDA (on a last twelve months' basis)
was 1.3 times as of 31 July 2022 (1.0 times as of 31 January 2022). At this
level, the Group has the necessary financial flexibility during this current
period of heightened uncertainty, whilst retaining an efficient cost of
capital.
Over the medium term, the Group's objective is a target of a maximum of c.2.0
times net debt to EBITDA. For further details please refer to 'Clear financial
priorities and capital allocation framework', within Section 2.
Net debt to EBITDA is set out below:
2022/23 2021/22
Moving annual total Year end
£m £m
Retail profit 936 1,148
Central costs (59) (60)
Depreciation and amortisation 564 555
EBITDA 1,441 1,643
Net debt 1,848 1,572
Net debt to EBITDA 1.3 1.0
Credit ratings
Kingfisher holds a BBB credit rating with Fitch, (P) Baa2 rating with Moody's,
and a BBB rating with Standard and Poor's. The Outlook is Stable across all
three agencies.
Revolving credit facility
In May 2021 the Group entered into a new £550m three-year revolving credit
facility (RCF) agreement with a group of its relationship banks, linked to
sustainability and community-based targets. In May 2022 the credit facility
was extended by one year and now expires in May 2025. As of 31 July 2022, this
RCF was undrawn.
Other borrowings
The Group repaid its €50m and £50m fixed term loans at maturity in
September 2021 and December 2021 respectively.
Covenants
The terms of the committed RCF 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 July 2022, Kingfisher's
ratio was higher than this requirement.
Total liquidity
As of 31 July 2022, the Group had access to over £1bn in total liquidity,
including cash and cash equivalents of £479m and access to a £550m RCF.
Further detail on Kingfisher's debt and facilities can be found at
www.kingfisher.com (http://www.kingfisher.com/index.asp?pageid=74) .
Free cash flow
A reconciliation of free cash flow is set out below:
2022/23 2021/22
£m £m
Operating profit 531 747
Adjusting items (2) (8)
Operating profit (before adjusting items) 529 739
Other non-cash items((1)) 295 295
Change in working capital (223) 157
Pensions and provisions (13) (13)
Net rent paid (223) (242)
Operating cash flow 365 936
Net interest paid (2) (4)
Tax paid (75) (78)
Gross capital expenditure (184) (131)
Free cash flow 104 723
Ordinary dividends paid (172) (174)
Share buybacks (218) -
Share purchase for employee incentive schemes (9) (29)
French tax authority payment((2)) (34) -
Other tax authority payment((3)) - (64)
Disposal of assets and other((4)) - (9)
Net cash flow* (329) 447
Opening net debt (1,572) (1,394)
Movements in lease liabilities 57 78
Other movement including foreign exchange (4) (39)
Closing net debt (1,848) (908)
((1)) Includes principally depreciation and amortisation, share-based
compensation charge and pension operating cost.
((2)) Payments made in relation to French tax authority settlement (refer to
the Taxation section above for further details).
((3)) Payments made in relation to the EC state aid challenge (refer to the
Taxation section above for further details).
((4)) Includes adjusting cash flow items, principally comprising restructuring
costs, offset by property disposals.
Operating profit (before adjusting items) was £210m lower than last year,
largely reflecting lower profits in the UK & Ireland.
The working capital outflow of £223m was driven by an increase in net
inventory of £395m. The majority of this increase was driven by inflation and
store expansion, with the balance including the Group's proactive rebuild of
inventory levels to support stronger product availability. Partially
offsetting this was a £172m increase in payables (net of increase in
receivables of £59m), largely reflecting the timing of inventory purchases
and higher VAT creditors.
Gross capital expenditure in H1 was £184m, increasing by 40% (H1 21/22:
£131m). Of this expenditure, 24% was invested in refreshing, maintaining and
adapting existing stores (including renewable energy initiatives), 13% on new
stores, 45% on technology and digital development, 3% on range reviews and 15%
on other areas including supply chain investment.
Overall, free cash flow for H1 was £104m (H1 21/22: £723m).
Net debt (including IFRS 16 lease liabilities) as of 31 July 2022 was £1,848m
(H1 21/22: £908m).
A reconciliation of free cash flow and net cash flow to the statutory net
movement in cash and cash equivalents and bank overdrafts is set out below:
2022/23 2021/22
£m £m
Free cash flow 104 723
Ordinary dividends paid (172) (174)
Share buybacks (218) -
Share purchase for employee incentive schemes (9) (29)
French tax authority payment((1)) (34) -
Other tax authority payment((2)) - (64)
Disposal of assets and other((3)) - (9)
Net cash flow (329) 447
Repayment of bank loans - (3)
Net (decrease)/increase in cash and cash equivalents (329) 444
and bank overdrafts
((1)) Payments made in relation to French tax authority settlement (refer to
the Taxation section above for further details).
((2)) Payments made in relation to the EC state aid challenge (refer to the
Taxation section above for further details).
((3)) Includes adjusting cash flow items, principally comprising restructuring
costs, offset by property disposals.
Pensions
As of 31 July 2022, the Group had a net surplus of £406m (H1 21/22: £361m
net surplus, FY 22/23: £410m net surplus) in relation to defined benefit
pension arrangements, of which a £542m surplus (£540m surplus as of 31
January 2022) was in relation to the UK scheme. The net surplus has remained
broadly stable in the period, with a higher discount rate reducing scheme
liabilities, offset by asset losses. This accounting valuation is sensitive to
a number of assumptions and market rates which are likely to fluctuate in the
future. The UK scheme's triennial funding valuation as of 31 March 2022 is
ongoing. Refer to note 11 of the condensed financial statements.
Risks
The Group's principal risks and uncertainties have been reviewed as part of
our half year procedures, and there are no additions or removals since the FY
21/22 year-end.
Over the last six months we have seen increased macroeconomic uncertainty with
discretionary spending coming under pressure across our markets due to
inflation and especially higher energy prices. We continue to carefully
monitor and manage the situation to ensure our costs are well controlled and
that we provide good value for money to our customers.
The risk of 'Political Volatility' remains high due to the ongoing war in
Ukraine, global tensions with China and the need for individual governments to
react to the current economic challenges. We assessed the specific risks
resulting from the conflict in Ukraine, including in the area of 'Cyber and
Data Security', and have taken specific actions to mitigate any impact. The
risk of 'Contagious Diseases' has been retained. Most countries have
successfully adapted to living with COVID. Several elements of the 'Supply
Chain Resilience' risk relating to the pandemic have reduced, with lead times
and service levels improving and less congestion in ports. However, the virus
is still prevalent as seen with recent lockdowns in Chinese regions, and there
is a continued risk that a future variant is resistant to vaccines.
· Our People: Our colleagues are critical to the successful
delivery of our 'Powered by Kingfisher' strategy. We have rebalanced
responsibilities between Group and banners to set the right conditions for our
individual banners to grow while leveraging the Group's scale and expertise to
meet customer needs. Our accelerated investment programme requires an
expansion of our technical capabilities. More generally, the failure to
attract, retain and develop colleagues with the appropriate skills,
capabilities and diverse backgrounds, or to have adequate succession plans,
could impact our ability to meet our business objectives.
· Level and Impact of Change: Under our strategic plan, the
business is utilising its core strengths and commercial assets, and 'powering'
its distinct retail banners to address the significant growth opportunities
that exist within the home improvement market. We have high ambitions and are
continuously improving our offer, market positions, cost base and technology.
In particular, we are rolling out a Group-wide IT systems development
programme. Where relevant we may also consider complementary acquisitions,
partnerships and joint ventures to optimise our business activities and
support our strategy. Failure to properly prioritise activity and manage
change effectively could result in weaker than anticipated sales growth,
reduced operating margins or insufficient cash being generated to meet
our objectives.
· Contagious Diseases: Over the past two and a half years,
Kingfisher has demonstrated its ability to navigate the challenging
operational impacts of the COVID pandemic, retaining good product availability
and operating safely. With the emergence of new variants, the risk of a
prolonged global health threat and associated government restrictions remains,
including the 'zero-COVID' policy in China, which could adversely affect our
operations and those of our partners and suppliers. This could cause a
significant reduction in footfall and consumer spending and could negatively
impact our ability to receive products from affected suppliers. High levels of
absence in either our workforce or our suppliers could impact our ability to
operate stores and warehouses, deliver products or provide appropriate
functional support to our business. Such restrictions and/or reductions in
demand could adversely affect our financial results and the financial
condition of the Group.
· Supply Chain Resilience: A resilient supply chain is key to our
business and the achievement of our strategic objectives. We are dependent on
complex global supply chains and fulfilment solutions to deliver our products
to our customers. We are also reliant on the ability of our suppliers to
respond quickly to changes in demand. Major disruption to our supply chain
could result in reduced levels of product available for sale, with an adverse
financial and reputational impact.
· Competition: Our competitors include both traditional store-based
and pure-play online retailers. The pandemic has accelerated changes in the
market, with a sharp rise in the use of online marketplaces and an increase in
the number of competitors in the home improvement market. Competitors are also
developing their offers, including both direct-to-customer operations and the
services offered. Targeted actions or disruptive behaviour by competitors
could negatively impact our market share, the value of our assets and our
financial results.
· Changing Customer Preferences: The pace of change remains high,
with a greater use of e-commerce solutions for click & collect and home
delivery. To make our products available to customers where and when they want
it, we have accelerated our investment programme. This ensures we have
innovative digital channels supported by an agile and reliable infrastructure,
including technology and logistics capability, and an optimised property
portfolio with in-store services. Failure to identify new trends and optimise
our channels quickly enough could affect our ability to stimulate spend and
adversely impact the value of our assets and our financial results.
· Political and Market Volatility: Kingfisher operates in eight
countries across Europe and relies on a global supply base, exposing us to
both geopolitical uncertainty and local volatility. Disruption could include
government restrictions on mobility, strikes, work stoppages and/or our
ability to receive products from affected countries. Market volatility has
increased since the pandemic began, resulting in increased energy prices,
changing customer behaviours and reduced consumer confidence. If governments
try to reduce their budget deficits through taxation, this will create
additional burdens on businesses. These impacts could potentially disrupt the
day-to-day operations of our business and our ability to meet our
strategic objectives.
· Legal and Regulatory: The Group's operations are subject to a
broad range of regulatory requirements in the markets in which it operates. A
major corporate issue or crisis, a significant fraud or material
non-compliance with legislative or regulatory requirements would impact our
brands and reputation, could expose us to significant fines or penalties and
would require significant management attention.
· Cyber and Data Security: Cyber-attacks and security incidents
continue to increase and the retail sector has joined a number of industry
sectors as a target due to it becoming more data driven. As we increase our
digital presence and develop smart products and services our risk profile will
continue to change. Failure to protect data, detect breaches, and respond
accordingly would negatively impact our operations, profitability and
reputation.
· Reputation and Trust: Our customers, colleagues, suppliers,
investors and the communities we source from and operate expect us to conduct
our business in a way that is responsible. One of the many ways we strive to
ensure this is through our publicly communicated Responsible Business strategy
and targets, covering topics such as climate change, responsible sourcing and
diversity (for further details please refer to 'Lead the industry in
Responsible Business practices', within Section 2). Failure to deliver on our
obligations and commitments could undermine trust in Kingfisher, damage our
reputation and impact our ability to meet our strategic objectives.
Further details of the Group risks and risk management process can be found on
pages 42 to 50 of the 2021/22 Annual Report and Accounts.
Section 6: Glossary
Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors have adopted various
Alternative Performance Measures (APMs), also known as non-GAAP measures, of
historical or future financial performance, position or cash flows other than
those defined or specified under International Financial Reporting Standards
(IFRS). These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those used by other
retailers. APMs should be considered in addition to, and are not intended to
be a substitute for, or superior to, IFRS measurements.
APM Closest equivalent IFRS measure Reconciling items to IFRS measure Definition and purpose
Adjusted basic earnings per share (EPS) Basic earnings per share A reconciliation of adjusted basic earnings per share is included in the Adjusted basic earnings per share represents profit after tax attributable to
Financial Review (Section 5) and note 8 of the condensed financial statements the owners of the parent, before the impact of adjusting items (see definition
below), divided by the weighted average number of shares in issue during the
period. The exclusion of adjusting items helps provide an indication of the
Group's ongoing business performance.
Adjusted effective tax rate Effective tax rate A reconciliation to the statutory effective tax rate is set out in the The adjusted effective tax rate is calculated as continuing income tax expense
Financial Review (Section 5) excluding tax adjustments in respect of prior years (including the impact of
changes in tax rates on deferred tax), significant one-off tax settlements and
provision charges/releases and the tax effects of adjusting items, divided by
continuing profit before taxation excluding adjusting items. Prior year tax
items represent income statement tax relating to underlying items originally
arising in prior years, including the impact of changes in tax rates on
deferred tax. The exclusion of items relating to prior years, and those not in
the ordinary course of business, helps provide a better indication of the
Group's ongoing rate of tax.
Adjusted pre-tax profit Profit before taxation A reconciliation of adjusted pre-tax profit is set out in the Financial Review Adjusted pre-tax profit is used to report the performance of the business at a
(Section 5) Group level. This is stated before adjusting items. The exclusion of adjusting
items helps provide an indication of the Group's ongoing business performance.
Adjusted pre-tax profit margin % No direct equivalent Refer to definition Adjusted pre-tax profit is used to report the performance of the business at a
Group level and is separately defined. Adjusted pre-tax profit margin %
represents adjusted pre-tax profit as a percentage of sales. It is a measure
of overall business profitability.
Adjusted post-tax profit Profit after tax A reconciliation of adjusted post-tax profit is set out in the Financial Adjusted post-tax profit is used to report the after-tax performance of the
Review (Section 5) and note 8 of the condensed financial statements business at a Group level. This is stated before adjusting items. The
exclusion of adjusting items helps provide an indication of the Group's
ongoing after-tax business performance.
Adjusting items No direct equivalent Not applicable Adjusting items, which are presented separately within their relevant income
statement category, include items which by virtue of their size and/or nature,
do not reflect the Group's ongoing trading performance. Adjusting items may
include, but are not limited to: non-trading items included in operating
profit such as profits and losses on the disposal, closure, exit or impairment
of subsidiaries, joint ventures, associates and investments which do not form
part of the Group's ongoing trading activities; the costs of significant
restructuring and incremental acquisition integration costs; profits and
losses on the exit of properties, impairments of goodwill and significant
impairments (or impairment reversals) of other non-current assets; prior year
tax items (including the impact of changes in tax rates on deferred tax),
significant one-off tax settlements and provision charges/releases and the tax
effects of other adjusting items; financing fair value remeasurements i.e.,
changes in the fair value of financing derivatives, excluding interest
accruals, offset by fair value adjustments to the carrying amount of
borrowings and other hedged items under fair value (or non-designated) hedge
relationships. Financing derivatives are those that relate to hedged items of
a financing nature.
Central costs No direct equivalent Not applicable Central costs principally comprise the costs of the Group's head office before
adjusting items. This helps provide an indication of the Group's ongoing head
office costs.
Constant currency No direct equivalent Not applicable Constant currency changes in total sales, LFL sales, gross profit, gross
margin %, retail profit, retail profit margin % and operating costs reflect
the year-on-year movements after translating the prior year comparatives at
the current year's average exchange rates. These are presented to eliminate
the effects of exchange rate fluctuations on the reported results.
Dividend cover No direct equivalent Not applicable Dividend cover represents the ratio of earnings to dividends. It is calculated
as adjusted basic earnings per share divided by the total (full year) dividend
per share. It is used as an indication of how sustainable dividend payments
are.
Digitally-enabled sales(±) No direct equivalent Refer to definition Digitally-enabled sales are e-commerce sales plus sales associated with
customer orders placed in stores or via contact centres for collection from
store or home delivery (via central home delivery or via store-to-home). It is
used to help track how well we are responding to changing customer behaviours.
E-commerce sales penetration %(±) No direct equivalent Refer to definition E-commerce sales penetration % represent total e-commerce sales as a
percentage of sales. For the purpose of this calculation only, sales are
adjusted to replace marketplace net sales with marketplace gross sales. It is
used to track the success of our e-commerce strategy.
First-party e-commerce sales(±) No direct equivalent Refer to definition First-party e-commerce sales are total first-party sales (excluding VAT)
derived from online transactions, including click & collect (C&C).
This includes sales transacted on any device, however not sales through a call
centre. Sales (and related commissions/fees) from products supplied by
third-party e-commerce marketplace vendors are excluded. It is used to measure
the performance of our first-party e-commerce business across the Group.
Total e-commerce sales(±) No direct equivalent Refer to definition Total e-commerce sales are first-party e-commerce sales plus marketplace gross
sales. References to digital or e-commerce sales growth relates to growth at
constant currency. It is used to measure the performance of all e-commerce
business (first-party and third-party) across the Group.
EBITDA Profit before taxation A reconciliation of EBITDA is set out in the Financial Review (Section 5) EBITDA (earnings before interest, tax, depreciation and amortisation) is
calculated as retail profit less central costs and before depreciation and
amortisation. This measure is widely used in calculating the ratio of net debt
to EBITDA, and is used to reflect the Group's leverage.
FFVR No direct equivalent Included within net finance costs in note 6 of the condensed financial FFVR (financing fair value remeasurements) is included within adjusting items
statements (see definition above) and represent fair value fluctuations from financial
instruments.
Free cash flow Net increase in cash and cash equivalents and bank overdrafts A reconciliation of free cash flow is set out in the Financial Review (Section Free cash flow represents the cash generated from operations (excluding
5) adjusting items) less the amount spent on interest, tax and capital
expenditure during the year (excluding asset disposals). This provides a
measure of how much cash the business generates that can be used for
expansion, capital returns and other purposes.
Gross margin % No direct equivalent Refer to definition Gross profit represents sales from the supply of home improvement products and
services (excluding VAT), less the associated cost of those sales. Gross
margin % represents gross profit as a percentage of sales. It is a measure of
operating performance.
LFL Sales Refer to definition LFL (like-for-like) sales growth represents the constant currency, YoY sales
growth for stores that have been open for more than one year. Stores
temporarily closed or otherwise impacted due to COVID are also included. It is
a measure to reflect the Group's performance on a comparable basis.
3-year LFL Sales Refer to definition 3-year LFL is calculated by compounding the current and prior two periods' LFL
growth. For example, H1 22/23 LFL growth of 5%, H1 21/22 LFL growth of 4%, and
H1 20/21 LFL growth of 3%, results in 3-year LFL growth of 12.5%. Russia (sale
completed on 30 September 2020) is excluded from Group and Other International
3-year LFL calculations. It is a measure of the Group's performance on a
comparable basis.
Marketplace gross merchandise value (GMV)(±) No direct equivalent Refer to definition Marketplace GMV is the total transaction value (including VAT) from the sale
of products supplied by third-party e-commerce marketplace vendors. It is used
to measure the performance of our e-commerce marketplace, and is the basis on
which our commissions from third-party vendors are determined.
Marketplace gross sales(±) No direct equivalent Refer to definition Marketplace gross sales is the transaction value (excluding VAT) from the sale
of products supplied by third-party e-commerce marketplace vendors. Returned
and cancelled orders are excluded. It is used to measure the performance of
our e-commerce marketplace.
Marketplace net sales(±) No direct equivalent Refer to definition Marketplace net sales are commissions (excluding VAT) earned on e-commerce
marketplace transactions, together with other service fees. This is included
within sales. Commissions are determined based on GMV. It is used to measure
the performance of our e-commerce marketplace.
Marketplace participation %(±) No direct equivalent Refer to definition Marketplace participation % represent B&Q's marketplace gross sales as a
percentage of B&Q's total e-commerce sales. It is used to track the
success of our marketplace strategy and performance.
Net debt No direct equivalent A reconciliation of this measure is provided in note 16 of the condensed Net debt comprises lease liabilities, borrowings and financing derivatives
financial statements (excluding accrued interest), less cash and cash equivalents and short term
deposits, including such balances classified as held for sale.
Net cash flow Net increase in cash and cash equivalents and bank overdrafts A reconciliation of net cash flow is set out in the Financial Review (Section Net cash flow is a measure to reflect the total movement in the net debt
5) and in note 16 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.
Retail profit Profit before taxation A reconciliation of Group retail profit to profit before taxation is set out Retail profit is stated before central costs, adjusting items and the Group's
in the Financial Review (Section 5) and note 4 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 cash and adjusting restructuring provision. The measure
provides an indication of the ongoing returns from the capital invested in the
business. Capital employed is calculated as a two-point average. The
calculation excludes disposed businesses.
Same-store net inventory Inventory Refer to definition Same-store net inventory movement represents the constant currency, YoY change
in net inventory before the impact of store openings and closures. Stores
temporarily closed or otherwise impacted due to COVID are also included. It is
a measure to reflect the Group's inventory management on a comparable basis.
(±) Indicates the inclusion of new APMs. The new APMs in the table above have
been introduced to track the performance and success of our e-commerce
businesses and digital products and services.
Other Definitions
Banque de France data for DIY retail sales (non-seasonally adjusted). Includes
relocated and extended stores.
http://webstat.banque-france.fr/en/browse.do?node=5384326
(http://webstat.banque-france.fr/en/browse.do?node=5384326)
'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). The sale of Russia was completed in FY 20/21 (on 30 September
2020). 'Other' consists of the consolidated results of NeedHelp (acquired in
November 2020), Screwfix International (launched online in France in April
2021), and results from franchise agreements.
SKU (Stock Keeping Unit) is defined as the number of individual variants of
products sold or remaining in stock. It is a distinct type of item for sale,
such as a product and all attributes associated with the item type that
distinguish it from others. These attributes could include, but are not
limited to, manufacturer, description, material, size, colour, packaging and
warranty terms.
UK & Ireland consists of B&Q in the UK & Ireland and Screwfix in
the UK & Ireland.
Section 7: Forward-looking statements
You are not to construe the content of this announcement as investment, legal
or tax advice and you should make your own evaluation of the Company and the
market. If you are in any doubt about the contents of this announcement or the
action you should take, you should consult a person authorised under the
Financial Services and Markets Act 2000 (as amended) (or if you are a person
outside the UK, otherwise duly qualified in your jurisdiction).
This announcement has been prepared in relation to the financial results for
the six months ended 31 July 2022. 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 (including but not limited to
the COVID pandemic), 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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