TIDMKGF
RNS Number : 8331M
Kingfisher PLC
19 September 2023
Half year results for the six months ended 31 July 2023
(unaudited)
Financial summary % Total % Total % LFL*
Change Change Change
--------- ----------- ----------
Constant Constant
2023/24 2022/23 Reported currency* currency
------------------------ ------------ ------------ --------- ----------- ----------
Sales GBP6,880m GBP6,809m +1.1% (1.0)% (2.2)%
Gross profit GBP2,495m GBP2,496m (0.1)% (2.0)%
Gross margin %* 36.3% 36.7% (40)bps (40)bps
Operating profit GBP367m GBP531m (30.9)%
Statutory pre-tax
profit
(PBT) GBP317m GBP474m (33.1)%
Statutory post-tax
profit GBP237m GBP373m (36.5)%
Statutory basic EPS 12.4p 18.6p (33.4)%
Net increase/(decrease) GBP51m GBP(329)m n/a
in cash(+/-)
Interim dividend 3.80p 3.80p -
Adjusted metrics
Retail profit* GBP433m GBP555m (22.0)% (23.0)%
Retail profit margin
%* 6.3% 8.2% (190)bps (180)bps
Adjusted pre-tax profit
(PBT)* GBP336m GBP472m (28.8)%
Adjusted post-tax
profit* GBP249m GBP368m (32.3)%
Adjusted basic EPS* 13.0p 18.3p (28.9)%
Free cash flow* GBP346m GBP104m n/a
Net debt*(1) GBP(2,181)m GBP(1,848)m n/a
* See page 5 for further details on non-GAAP measures and other
terms; (+/-) Net increase/(decrease) in cash and cash equivalents
and bank overdrafts
Highlights
-- Group H1 sales slightly ahead of expectations. Total sales
-1.0% and LFL -2.2%, with Q2 LFL -1.2% accelerating from Q1 (LFL
-3.3%)
-- Sales by region:
- Positive UK & Ireland performance (LFL +1.7%) with strong market share gains at Screwfix
- France (LFL -3.8%) saw resilient performance at Castorama; weaker at Brico Dépôt
- Poland (LFL -10.9%) impacted by strong comparatives and weaker than expected Q2
-- Sales by category:
- Resilient core and 'big-ticket' category sales LFL -1.0% (78%
of sales), with volumes showing an improving trend through H1
- Seasonal sales LFL -5.9% (22% of sales), with sequential
improvement in Q2 driven by better UK weather conditions in May and
June
-- Continuing to invest in our strategic priorities, including
e-commerce and marketplace, data and retail media, developing our
trade proposition, and Screwfix
-- H1 adjusted PBT down 28.8% to GBP336m, with UK & Ireland
and France slightly ahead of expectations (the latter due to good
cost control), more than offset by lower than expected Poland
performance. Statutory PBT down 33.1% to GBP317m
-- FY adjusted PBT guidance: Q3 LFL to date -2.4%. Reflecting H1
results and the trading environment in our markets, updating our
full year adjusted PBT guidance to c.GBP590m (previously
c.GBP634m)
-- Continue to expect >GBP500m free cash flow for the year,
underpinning attractive shareholder returns with over GBP260m
returned in H1. Announcing today a new GBP300m share buyback
programme
Thierry Garnier , Chief Executive Officer, said:
"Our LFL sales in H1 were slightly ahead of expectations,
against a backdrop of unseasonal weather and ongoing macroeconomic
challenges in our markets. We saw good growth in our UK banners,
with Screwfix gaining significant market share. At the same time,
we faced strong comparatives and a weaker trading environment in
Poland, while consumer confidence in France is at a 10-year low.
Overall, demand for our core and 'big-ticket' categories was
healthy, and we were pleased to see an improving volume trend in
these categories through the half.
"We continue to make strong progress against our strategic
priorities. E-commerce sales were up 7% in H1, supported by the
continued success of our online marketplaces. B&Q's marketplace
sales reached 33% of its e-commerce business in July. We leveraged
our data science capabilities to develop AI-powered solutions such
as our markdown tool, which in early pilots at B&Q delivered a
very encouraging margin improvement on clearance products. We also
advanced our retail media plans through new partnerships to
accelerate advertising income. And we continued to invest in
dedicated ranges, tailored services and expert colleagues to better
serve trade customers across all our banners, including launching
'Pro' zones in 27 stores in France and Poland.
"Further, with nine Screwfix stores now open in France including
four new stores in H1, customer momentum is building. We are now
planning for up to 20 store openings this year. These early results
in France have encouraged us to take the next step in our
international expansion journey, and we are today announcing the
launch of Screwfix in Q3 as a pure-play online retailer in up to 20
European countries.
"Trading in the UK & Ireland continues to have positive
momentum. However, to better reflect our performance in H1 and the
trading environment in our markets, we have updated our profit
guidance for this year and are proactively managing our operating
costs accordingly. We remain very positive on the medium-to-long
term outlook for home improvement growth in our markets, and
confident in our ability to grow market share and deliver on our
medium-term financial objectives. Underscoring this confidence, we
are today announcing a new GBP300m share buyback programme,
starting in early October."
H1 23/24 results summary
-- Sales -1.0% in constant currency, reflecting resilience
across both retail and trade channels, particularly in the UK &
Ireland*
-- LFL sales -2.2%
- Year-on-year (YoY) growth in the UK & Ireland; weak
consumer sentiment in Poland and France*; strong prior year
comparatives in Other International* (Poland, Iberia* and
Romania)
-- Q2 23/24 LFL sales -1.2%, improving from Q1 23/24 (LFL -3.3%)
- UK & Ireland: strong performance at B&Q across May and
June (LFL +7.0%), with July impacted by unseasonal weather;
acceleration in LFL from Q1 at Screwfix supported by robust demand
from trade customers
- France: resilient performance at Castorama, particularly in
core and 'big-ticket' categories*; weaker performance at Brico
Dépôt following unsuccessful reallocation of marketing to
digital
- Poland: macroeconomic backdrop continues to be challenging;
weaker consumer sentiment reflected in lower than expected sales
and profit in Q2
-- Total e-commerce sales* +7.1%, driven by growth in the UK & Ireland and France
- E-commerce sales penetration* of 16.8% (H1 22/23 and H1 19/20: 15.6% and 7.3%, respectively)
- Continued strong growth of B&Q marketplace gross sales*,
reaching 33% of B&Q's e-commerce sales in July 2023
-- Gross margin % -40 basis points to 36.3% (H1 22/23: 36.7%)
reflecting higher customer participation in promotional activity in
France and Poland, higher clearance costs and stock provisions, and
sales mix in Poland
-- Retail profit -23.0% in constant currency to GBP433m (H1
22/23: GBP555m), largely reflecting lower gross profits in Poland
and France, and higher operating costs* in the UK & Ireland and
Poland largely due to higher pay rates and energy costs
-- Statutory pre-tax profit -33.1% to GBP317m (H1 22/23:
GBP474m), reflecting lower operating profit, including the impact
of impairments reflecting revised future projections
-- Adjusted pre-tax profit -28.8% to GBP336m (H1 22/23:
GBP472m), reflecting lower retail profit and higher central costs*
and share of JV interest and tax, partially offset by lower net
finance costs
-- Free cash flow of GBP346m, up GBP242m (H1 22/23: GBP104m),
reflecting lower EBITDA* more than offset by the unwind of working
capital outflows from the prior year
-- Net increase in cash of GBP51m (H1 22/23: net decrease in
cash GBP329m), reflecting higher free cash flow, partially offset
by GBP264m returned to shareholders via ordinary dividends and
share buybacks
-- Net debt down to GBP2,181m (31 January 2023: GBP2,274m),
including GBP2,398m of lease liabilities under IFRS 16, largely
reflecting the net increase in cash. Net debt to last twelve
months' EBITDA of 1.6x (31 January 2023: 1.6x)
-- Interim dividend per share declared of 3.80p (FY 22/23 interim dividend: 3.80p)
FY 23/24 outlook
-- Current trading in Q3:
- Q3 23/24 LFL sales (to date)(2) - 2.4 %
- Against Q2 sales trends, continued positive momentum in the UK
& Ireland, slight slowdown in France, small improvement in
Poland
- Core and 'big-ticket' category volume trends continuing to improve
-- Expectations for H2:
- Maintain disciplined trading and competitive price indices
- Easing YoY inflation on COGS, staff and energy costs
- Actively managing operating costs to align to trading conditions
-- Based on our H1 performance and the trading environment in
our markets, we are updating our FY 23/24 adjusted PBT guidance to
c.GBP590m(3) (previous guidance: comfortable with consensus of
sell-side analyst estimates for FY 23/24 adjusted PBT of GBP634m,
as of 24 April 2023)
-- Remain on track to reduce our net inventory this year
-- Continue to expect >GBP500m free cash flow for the full
year, supported by the unwind of working capital outflows from the
prior year
-- A nnouncing a new GBP300m share buyback programme today,
following the completion of GBP600m of buybacks over the last two
years
Continuing to deliver against our strategic priorities
1) Grow by building on our different banners:
- B&Q's trade-focused banner, TradePoint, opened 18 new
trade counters in H1, extending its presence within the B&Q
store network to 207 (67% of stores)
- Screwfix opened 12 stores in the UK & Ireland in H1; on
track for up to 60 new stores in these countries in FY 23/24
- Four Screwfix stores opened in France (nine in total), with
positive customer feedback and momentum. Now planning for up to 20
store openings in FY 23/24 (previous guidance: up to 25) with focus
on growing brand awareness and sales
- Preparing for launch in Q3 of Screwfix as a pure-play online
retailer in continental Europe, serving up to 20 European
countries
- One new Castorama store opened in Poland; slightly slowing
down expansion in H2 and now planning for a total of five new
stores in FY 23/24 (previous guidance: seven stores). Remain
comfortable with target of up to 80 new medium-box and compact
stores over next five years
2) Accelerate e-commerce through speed and choice:
- Total e-commerce sales of GBP1.2bn in H1, a 7.1% increase YoY,
with sales penetration of 16.8% (H1 22/23: 15.6%). Ambition to
reach 25% sales penetration
- 92% of all e-commerce orders picked in store (H1 22/23: 91%)
- Growing adoption of our last-mile delivery options, including
increased use of Screwfix Sprint resulting from a targeted national
advertising campaign
- Continued rapid growth of e-commerce marketplace proposition
at B&Q and Iberia (reaching 33% marketplace participation* at
B&Q in July 2023); marketplaces in France and Poland to launch
in 2024
- Signed strategic partnership with Octopia, giving Kingfisher
access to thousands of additional marketplace merchants
globally
3) Build a data-led customer experience:
- Continued to invest in development of in-house data and
artificial intelligence (AI) capabilities
- Implemented AI-powered product recommendation and
personalisation engines at B&Q and Screwfix , with early pilots
generating up to 10% of e-commerce sales
- Deployed AI-driven tools to optimise markdowns and clearance;
early pilots at B&Q delivering very encouraging gross margin
improvement on clearance products
- Developed end-to-end supply chain visibility tool to support
lower inventory levels and faster replenishment cycles. Live in
France, Iberia and Romania, and already showing early success of
reducing inventory levels without impacting product
availability
- Accelerating advertising income, initially in France. Signed
new partnerships with CitrusAd for technology and Unlimitail, the
new retail media joint venture between Carrefour and Publicis, for
sales support
4) Differentiate and win through own exclusive brands (OEB):
- OEB products continuing to drive affordability, product
innovation and reduced environmental impact, and carrying a higher
gross margin % on average than branded products
- Total OEB sales* of GBP3.1bn in H1; 46% of Group sales (H1 22/23: 46%). LFL sales -3.3%
- Resilient OEB sales trends in EPHC (electricals, plumbing,
heating & cooling), tools & hardware and building &
joinery categories
- Strong results from OEB ranges launched following key range reviews last year
5) Develop our trade business:
- TradePoint LFL sales -1.8%, against robust prior year
comparatives, representing 20% sales penetration of B&Q (H1
22/23: 21%). Medium-term target of >GBP1bn of TradePoint
sales
- Growing TradePoint focus on business-to-business (B2B) with
sales up by over 30% YoY, catering to trade federations,
professional housebuilders and small and medium-sized
enterprises
- Making good progress across all other banners, including
testing dedicated trade zones in 27 stores in France and Poland,
the introduction of new trade-focused services (e.g., finance
deals), and the continued curation of pro-specific product ranges.
Encouraging early results on sales and trade customer
penetration
6) Roll out compact store formats:
- High street compact store tests (B&Q Local in the UK,
Casto in France and Castorama Express in Poland) continue to
deliver encouraging learnings and results
- Small retail park concepts being adapted and iterated to find optimum blueprint
- Continuing to test Screwfix's ultra-compact 'Collect' and 'XSR' store format tests in the UK
- Brico Dépôt France successfully opened its first compact
store, an innovative 1,000 sqm format
7) Lead the industry in Responsible Business and energy efficiency:
- Continuing to take swift action to help colleagues manage higher costs of living
- New target established for more than 20,000 colleagues to
complete an apprenticeship, traineeship or external qualification
by 2030
- Momentum in actions to reduce emissions from our operations
(e.g., the deployment of electric vehicles across our delivery
fleets, and the installation of air source heat pumps at
Screwfix)
- Reported scope 3 emissions reduction (i.e., from our supply
chain and customer use of products) of 34.1% since FY 17/18 (FY
22/23: 19.7%); on track to meet 1.5degC-aligned target of 40% by
2025
- Leveraging OEB capabilities to build products that reduce
impact on the environment. Kingfisher's Sustainable Home Products
represented 47% of Group sales last year (FY 21/22: 44%)
8) Human, agile and lean:
- Conducted Group-wide colleague engagement survey in June; participation up 4% YoY to 87%
- Employee Net Promoter Score (eNPS) of 57, up three points YoY,
setting Kingfisher within the top 5% of worldwide retailers
- Progress made in transitioning to a more agile and modular
technology operating model; moving from physical data centres to
the cloud through a new strategic partnership with Google
- Continuing to deliver on multi-year cost reduction programmes
to partly offset costs of inflation, expansion and space changes,
and our investment requirements over the medium term
- Decrease in net inventory of 2% YoY (in constant currency)
driven by a reduction in seasonal and 'buffer' stock, lower
purchasing, and strategic reduction initiatives; partially offset
by product cost inflation. Inventory in units (volume) down 11%
YoY
- Actions underway to further optimise supply chain, inventory
management and sourcing footprint
- Established procurement joint venture in France with Mr.
Bricolage Group, focused on common national and international
suppliers
Information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation No. 596/2014. Upon the publication of this announcement,
this inside information is now considered to be in the public
domain. This announcement is being released on behalf of Kingfisher
by Chloe Barry, Company Secretary.
Footnotes
(1) Net debt includes GBP2,398m of lease liabilities under IFRS
16 in H1 23/24 (H1 22/23: GBP2,318m).
(2) 'Q3 23/24 LFL sales (to date)' represents the period from 30
July 2023 to 9 September 2023 compared against the equivalent
period in the prior year (i.e., 31 July 2022 to 10 September 2022).
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 investorenquiries@kingfisher.com
1082
Media Relations +44 (0) 20 7644 corpcomms@kingfisher.com
1030
Teneo +44 (0) 20 7420 Kfteam@teneo.com
3184
Half year results announcement and data tables
This announcement and data tables for H1 23/24 can be downloaded
from the Investors section of our website at
www.kingfisher.com/investors . You can follow us on LinkedIn with
the results tag #KingfisherResults.
Results presentation
We will host an in-person results presentation for
pre-registered analysts and investors today at 09.00 (UK time) at
the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.
A simultaneous live video webcast of the presentation and Q&A
will also be available via the Investors section of our website at
www.kingfisher .com, and subsequently available on demand.
For enquiries, please email investorenquiries@kingfisher.com
.
Financial calendar ((+/-) Dates are provisional and may be
subject to change)
Q3 23/24 trading update 22 November 2023
Full year results 25 March 2024(+/-)
Q1 24/25 trading update 22 May 2024(+/-)
Half year results 17 September 2024(+/-)
Q3 24/25 trading update 27 November 2024(+/-)
American Depository Receipts
Kingfisher American Depository Receipts are traded in the US on
the OTCQX platform: (OTCQX: KGFHY)
www.otcmarkets.com/stock/KGFHY/quote .
The remainder of this release consists of seven main
sections:
1) H1 2023/24 Financial performance summary and current trading
2) Group update (including 'Powered by Kingfisher' strategic plan)
3) Trading review by division
4) FY 2023/24 Technical guidance
5) H1 2023/24 Financial review and, in part 2 of this
announcement, the condensed financial statements
6) Glossary
7) Forward-looking statements
Section 1: H1 2023/24 Financial performance summary and current
trading
Income statement summary
GBPm % Total % Total % LFL
Change Change Change
-------- -------- -------- --------- ----------
Constant Constant
2023/24 2022/23 Reported currency currency
---------------------------- -------- -------- -------- --------- ----------
Sales 6,880 6,809 +1.1% (1.0)% (2.2)%
Gross profit 2,495 2,496 (0.1)% (2.0)%
Retail profit:
UK & Ireland 306 339 (9.8)% (9.8)%
France 104 129 (19.3)% (21.9)%
----------------------------- -------- -------- -------- ---------
Poland 35 94 (62.5)% (64.4)%
Iberia 3 6 (48.7)% (50.3)%
Romania (10) (4) n/a n/a
Other(1) (10) (13) n/a n/a
Turkey (50% joint venture) 5 4 n/a n/a
----------------------------- -------- -------- -------- ---------
Other International 23 87 (73.8)% (74.6)%
----------------------------- -------- -------- -------- ---------
Retail profit 433 555 (22.0)% (23.0)%
Central costs (36) (26) (38.5)%
Share of JV interest (11) - n/a
and tax
Operating profit
(before adjusting
items*) 386 529 (27.0)%
----------------------------- -------- -------- --------
Net finance costs (50) (57) +12.2%
Adjusted pre-tax profit 336 472 (28.8)%
----------------------------- -------- -------- --------
Adjusting items (19) 2 n/a
Statutory pre-tax
profit 317 474 (33.1)%
----------------------------- -------- -------- --------
LFL sales by quarter
Quarterly sales % LFL Change
---------------------------------
Q1 23/24 Q2 23/24 H1 23/24
UK & Ireland (0.8)% +4.1% +1.7%
- B&Q (1.6)% +3.3% +1.0%
- Screwfix +0.7% +5.6% +3.1%
France (4.1)% (3.5)% (3.8)%
- Castorama (3.1)% (2.3)% (2.7)%
- Brico Dépôt (5.2)% (4.8)% (5.0)%
Other International (8.1)% (9.3)% (8.8)%
- Poland (10.3)% (11.5)% (10.9)%
- Iberia +2.5% (4.2)% (1.2)%
- Romania (7.8)% (2.7)% (4.9)%
--------------------------- --------- --------- ---------
Group LFL (3.3)% (1.2)% (2.2)%
--------------------------- --------- --------- ---------
Total e-commerce sales(2) +4.6% +9.5% +7.1%
H1 LFL sales by core and 'big-ticket' vs seasonal
% LFL Change
------------------------- --------------------------------------------
Core and 'big-ticket' Seasonal H1 23/24
------------------------- ---------------------- --------- ---------
UK & Ireland +2.8% (2.1)% +1.7%
- B&Q +2.7% (3.2)% +1.0%
- Screwfix +3.0% +4.4% +3.1%
France (2.1)% (8.5)% (3.8)%
- Castorama (0.9)% (7.0)% (2.7)%
- Brico Dépôt (3.4)% (10.8)% (5.0)%
Other International (8.6)% (9.3)% (8.8)%
- Poland (10.8)% (11.3)% (10.9)%
- Iberia +0.2% (6.4)% (1.2)%
- Romania (6.1)% (1.3)% (4.9)%
------------------------- ---------------------- --------- ---------
Group LFL (1.0)% (5.9)% (2.2)%
Proportion of sales 78% 22%
Quarterly LFL sales by core and 'big-ticket' vs seasonal
% LFL Change
----------------- ---------------------------------------------------------------------------
Core and Seasonal(3) Q1 Core and Seasonal Q2 23/24
'big-ticket'(3) 23/24 'big-ticket'
----------------- ---------------- ------------ ------------- --------- -----------
UK & Ireland +1.9% (12.6)% (0.8)% +3.8% +5.0% +4.1%
- B&Q +2.4% (14.0)% (1.6)% +3.0% +4.1% +3.3%
- Screwfix +1.2% (4.6)% +0.7% +5.0% +11.1% +5.6%
France (2.2)% (10.7)% (4.1)% (2.1)% (7.0)% (3.5)%
- Castorama (1.3)% (8.4)% (3.1)% (0.4)% (6.0)% (2.3)%
- Brico
Dépôt (3.1)% (13.7)% (5.2)% (3.7)% (8.4)% (4.8)%
Other
International (8.7)% (5.4)% (8.1)% (8.5)% (11.8)% (9.3)%
- Poland (10.5)% (9.6)% (10.3)% (11.2)% (12.4)% (11.5)%
- Iberia (0.2)% +19.3% +2.5% +0.6% (16.6)% (4.2)%
- Romania (9.9)% (1.3)% (7.8)% (3.2)% (1.3)% (2.7)%
----------------- ---------------- ------------ -------- ------------- --------- -----------
Group LFL (1.4)% (10.6)% (3.3)% (0.6)% (2.7)% (1.2)%
Proportion of
sales 82% 18% 74% 26%
Trading in Q2 23/24
LFL sales were down by 1.2% in Q2, showing momentum from Q1. The
surfaces & décor and tools & hardware categories were the
standout performers with positive LFLs, and we saw resilient sales
trends in building & joinery and bathroom & storage.
Outdoor category sales improved significantly from Q1. E-commerce
sales were up by 9.5% in Q2, driven by the continued growth of
B&Q's e-commerce marketplace in the UK together with strong
online sales growth in France.
Overall LFL in May and June (combined) was slightly positive. We
saw an improvement in seasonal category* sales, particularly in the
UK, following unseasonably wet weather conditions in Q1. We also
saw continued resilience in our core and 'big-ticket' categories
across all our customer segments, in particular from trade and
DIFM*. In the UK, LFL for May and June was +7.0%, with both B&Q
and Screwfix growing faster than their respective markets (as
measured by the British Retail Consortium, Barclaycard and GfK).
Castorama France LFL was slightly negative, with its core and
'big-ticket' categories performing particularly well against the
backdrop of weak consumer sentiment. Brico Dépôt performed less
well, impacted by the reallocation of a portion of its marketing
budget to digital which proved unsuccessful - and has been
corrected since mid-July. Brico Dépôt also saw lower cross-selling
from its special promotions (or 'arrivages'). Castorama Poland's
performance was impacted by ongoing macroeconomic challenges in the
country (high inflation and interest rates, decline in GDP in H1),
leading to weaker consumer sentiment and lower sales than
expected.
In July our trading momentum was affected by unseasonably poor
weather (particularly in the UK and France), against a comparative
month of July 2022 which saw an unusual heatwave across the UK and
Western Europe. Given this, LFL seasonal sales for the Group were
down 22.3% for the month. However, we saw a clear trend of
customers moving to more indoor-based projects, with LFL sales from
our core and 'big-ticket' categories up by 2.1% for the Group.
Iberia and Romania experienced more normal weather conditions and
saw an acceleration in sales trends in July versus May and June,
supported by seasonal category sales.
Current trading in Q3 23/24
Q3 23/24 LFL sales (to date)(4) are down by 2.4%. Compared to
our sales trends in Q2 (LFL -1.2%), we are seeing continued
positive momentum in the UK & Ireland, with good demand from
DIY and DIFM/trade customers and improved weather since mid-August
supporting growth in both c ore and 'big-ticket' and seasonal
category sales. In France we have seen a slight slowdown in the
sales trend, reflecting continued weak consumer sentiment in the
country. In Poland, we have seen a small improvement in the sales
trend relative to Q2.
Core and 'big-ticket' category volumes for the Group show a
continued improvement in the YoY trend, versus Q1 and Q2.
Footnotes
(1) 'Other' consists of the consolidated results of Screwfix
International, NeedHelp, and results from franchise agreements.
(2) Total e-commerce sales are first-party e-commerce sales plus
marketplace gross sales. Please refer to the glossary in Section 6
for definitions. References to digital or e-commerce sales growth
relates to growth in constant currency and covers the total
Group.
(3) Core and 'big-ticket' and seasonal category sales for Q1
23/24 have been restated to reflect a slightly updated
categorisation of sales, adopted in Q2. Please refer to the
glossary in Section 6 for definitions.
(4) 'Q3 23/24 LFL sales (to date)' represents the period from 30
July 2023 to 9 September 2023 compared against the equivalent
period in the prior year (i.e., 31 July 2022 to 10 September 2022).
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)
At Kingfisher, we believe a better world starts with better
homes.
Earlier this year we refreshed the focus areas of our 'Powered
by Kingfisher' strategy to ensure data, trade, culture and agility
were given increased prominence and focus. Doing so also gave us
better alignment with our investments for growth in multiple areas
of the business.
Put simply, our strategic 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.
The differentiation of our retail banners across trade
(Screwfix, TradePoint), discounters (Brico Dépôt France, Brico
Dépôt Iberia), and more general DIY* needs (B&Q, Castorama
France, Castorama Poland, Brico Dépôt Romania, Koçta ) is a unique
strength for us; more so in a more volatile and uncertain world.
Equally, Kingfisher's scale and resources are a critical source of
competitive advantage for our banners, providing product
development and supply (through our industry-leading own exclusive
brands), access to leading-edge technology, digital and data
capabilities, as well as international support, sourcing and buying
scale.
We are continuing to invest for growth in multiple areas of the
business, underscoring our confidence in the medium-to-long term
outlook for home improvement growth in our markets. We are pleased
with the progress we have made over the last six months, against
the backdrop of what remains an extraordinarily challenging
operating environment.
The following section covers the progress made in H1 against our
strategic plan :
a) Grow by building on our different banners
b) Accelerate e-commerce through speed and choice
c) Build a data-led customer experience
d) Differentiate and win through own exclusive brands (OEB)
e) Develop our trade business
f) Roll out compact store formats
g) Lead the industry in Responsible Business and energy efficiency
h) Human, agile and lean
a) Grow by building on our different banners
Our retail banners occupy number one or two positions in our key
markets. These banners address a diverse range of customer needs,
each operating different models tailored to these needs, with clear
positionings and plans. Our goal is to grow by building on our
different formats in existing and new markets, leveraging the power
of Kingfisher. Over the medium term we believe net space growth
will drive an uplift in sales of +1.5% to +2.5% per annum.
In H1, B&Q successfully rolled out its new ' Local '
sub-branding across all eight of its high street stores, following
two successful tests in FY 22/23. 'Local' stores address the
customer needs of immediacy and convenience in locations with high
footfall. We continue to adopt a 'test and learn' approach with
these B&Q compact stores, focusing on establishing the correct
blueprint for the in-store range of products and services available
for customers, while optimising the economics. B&Q opened one
new store in H1 and closed all eight of its 'grocery concession'
format stores. We believe there are around 50 catchments or
geographic 'white spaces' in the UK where B&Q is currently
under-represented. Please refer to 'Roll out compact store formats'
below for further details of B&Q's evolving store
footprint.
Increasing engagement with trade customers is a key driver of
Kingfisher's growth ambitions. B&Q's trade-focused banner,
TradePoint, has been one of the fastest-growing banners in
Kingfisher over the last three years. The business delivered a good
performance in H1, against robust prior year comparatives. LFL
sales for TradePoint were down 1.8%, representing 20% sales
penetration within B&Q (H1 22/23: 21%). TradePoint opened 18
trade counters in H1, extending its presence within the B&Q
store network to 207 (67% of stores). Please refer to 'Develop our
trade business' below for further details.
Screwfix, the UK's number one 'light-trade' retailer, continues
to expand through its capital-light and high-return small format
outlets. In H1, the business opened 12 stores, including 10 in the
UK and two in Ireland, bringing the total number of stores to 884
in both countries as of 31 July 2023. Ultra-convenience is one of
Screwfix's key differentiators, and the business continues to plan
for up to 60 new stores in the UK & Ireland in FY 23/24,
keeping it on track to reach its medium-term goal of over 1,000
stores.
Screwfix progressed its international expansion plans in H1 by
opening four stores in France, bringing its total to nine stores.
With its proven and successful business model, supported by
Kingfisher's scale, local knowledge and relationships, Screwfix is
very well positioned to address the light-trade segment in France,
which has an estimated total market size of over EUR 29 bn. We are
pleased with the customer reaction to date, with the business
recording strong store net promoter scores (on par with UK stores),
and national brand awareness being higher than our closest
competitor. Furthermore, our OEB products are landing well with
customers, as we continue to 'test and learn' with the product
offering. The business is planning to open up to 20 stores in FY
23/24 (previous guidance: up to 25), with a focus on growing sales
and brand awareness of existing stores. A ssuming the success of
the format is confirmed , we see the potential for more than 600
stores in France over the longer term .
The early results in France have encouraged us to take the next
step in Screwfix's international expansion journey. In Q3 , we
intend to launch Screwfix as a pure-play online retailer in
continental Europe (under the domain name screwfix.eu), serving up
to 20 European countries.
Brico Dépôt France is one of the global home improvement
industry's best hard discounters. With its 124 stores in France,
and agile and lean operating model, the business is well positioned
to penetrate more of the geographic 'white spaces' that exist in
France. In June, Brico Dépôt opened its first compact store in
France - an innovative 1,000 sqm format. Please refer to 'Roll out
compact store formats' below f or further details.
In Poland, Castorama is the market leader and the most trusted
and reputable home improvement brand. During the period, Castorama
opened one new store and launched tests for dedicated ' CastoPro '
zones in three of its stores. Please refer to 'Develop our trade
business' below for further details of Castorama's progress and
plans. Given the prevailing macroeconomic and consumer conditions
in Poland in the near term, Castorama is slowing down its store
expansion plans slightly this year, now planning for a total of
five new stores in FY 23/24 (previous guidance: seven stores).
However, we look to the longer-term market growth opportunity in
the country with deep conviction. Castorama plans to address the
significant 'white spaces' that exist in Poland through the opening
of up to 80 medium-box and compact stores over the next five
years.
In Turkey, Kingfisher's 50% joint venture, Koçta , opened 42
stores (40 compact and two big-boxes) in its financial half-year to
30 June 2023, bringing its total store count to 397. The business
is targeting approximately 55 new stores in FY 23/24, supported by
Koçta ' innovative 'Fix' compact store format. We believe the
longer-term growth opportunity for the home improvement industry in
Turkey is significant.
A common thread through the narrative above is that compact
stores are a key enabler for expansion in many of our banners and
markets. The customer demands for speed and convenience are driving
the need for a wider network of smaller and more accessible stores,
and we believe compact stores unlock the opportunity for rapid
expansion into smaller cities and geographic 'white spaces'. Please
refer to 'Roll out compact store formats' below for further
details.
Longer term, we also believe new markets - addressed through
franchise and wholesale models - could be an attractive source of
growth. We will continue to test and, where necessary, adjust our
plans. Following extensive testing and review, our two B&Q
franchise stores in Saudi Arabia will close by early 2024, and we
will re-focus efforts on wholesale and franchise agreements in
other markets. We currently have two wholesale agreements in place
with the Al-Futtaim Group in the Middle East, whereby certain OEB
products are supplied to its retailers.
b) Accelerate e-commerce through speed and choice
We plan to accelerate our e-commerce sales, with the ambition of
reaching 25% e-commerce sales penetration. We will do this by
offering our customers faster fulfilment of orders, greater
convenience and broader product choice, leveraging our store
assets, e-commerce marketplace and data-led propositions. This will
be supported by the ongoing modernisation and simplification of our
technology landscape, which is unlocking the rapid development of
more customer-centric digital tools and services.
Speed and convenience
Total e-commerce sales, which include gross sales from
third-party (3P) e-commerce marketplace transactions, as well as
first-party e-commerce sales*, reached GBP1.2bn in H1. This
represents an increase of 7.1% YoY (in constant currency), driven
by increased marketplace participation in addition to higher
first-party e-commerce sales across the Group . Overall e-commerce
sales penetration was 16.8% (H1 22/23: 15.6 %; H1 19/20: 7.3
%).
Sales from click & collect (C&C), our most popular
online fulfilment channel, were up 3% YoY. C&C accounted for
87% of total e-commerce orders (H1 22/23: 87%) and 67% of total
e-commerce sales (H1 22/23: 70%). All our banners continue to make
enhancements to their respective C&C customer journeys to
improve speed and convenience . For example, we are using data to
optimise C&C picking routines, leading to a significant
decrease in pick times. 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 up 18% YoY, reflecting the development
of our e-commerce marketplace and same-day delivery propositions.
Faster fulfilment is a key competitive advantage for our banners,
especially over pure-play online peers, so we are introducing and
testing options around same-day, next-day and specific-day delivery
options. For example, Screwfix Sprint offers delivery direct to
home or site within one hour. Sprint is currently available in 325
stores, covering around 45% of UK postcodes. In H1, Screwfix began
advertising the proposition widely through television, radio ,
press, website and in-store campaigns , resulting in a significant
increase in customer awareness of the service. We saw particularly
strong success among trade customers in London.
Moving to store-based picking and fulfilment has been critical
in enabling us to serve customers more efficiently. It 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
92% of the Group's e-commerce orders in store (excluding Screwfix:
89%). 52 B&Q stores are being used as 'digital hubs' for
fulfilling home deliveries, serving near to 100% of the UK. These
hub stores are selected based on their catchment and the depth of
their in-store range. At B&Q, we recently commenced
implementation of new order management capabilities for home
deliveries. This has driven increases in 'save the sale' orders
(where our previous ordering system would have shown an item as out
of stock in the customer's local store) alongside reductions in
fulfilment costs. In H1, our new order sourcing and management
system 'saved' B&Q around 2% of its home delivery orders . The
model is being tested and assessed in France and Poland.
Across all our banners, we are improving the online customer
journey by adding new features through our Group-driven digital
capabilities to enhance the website and mobile user experiences. We
simplified our technology architecture, enabling quicker changes to
be made to our technology products and platforms. For example in H1
we implemented Fasterize, a software-as-a-service solution, in
Castorama France following successful implementation in Brico Dépôt
France, where we saw a 30% improvement in its website's speed and
page-load times. Brico Dépôt France's total e-commerce sales in H1
grew the fastest of all our banners in the Group. We plan to test
this solution at B&Q and Castorama Poland in H2. We also
improved our payment options with 'Buy Now, Pay Later' and 'Pay in
Instalments' options available via PayPal in the UK and France. In
the UK, we implemented a new 3P credit solution offering flexible
credit, allowing B&Q customers to decide when and how they
repay their credit loans.
Mobile remains our largest and fastest-growing channel (versus
desktop and tablet), and performed strongly in H1, up 11% YoY.
Mobile sales accounted for 59% of our first-party e-commerce sales
(H1 22/23: 56%), representing an increase of 23 percentage points
versus H1 19/20. In H1, we further strengthened our app
capabilities. For example, Screwfix integrated Braze, a 3P customer
relationship management (CRM) platform, into the Screwfix app to
deliver personalised offers and deals for their most frequent trade
customers. Our key mobile priorities for H2 are to further improve
app capabilities across the Group, and optimise our mobile
marketing and trading strategies.
Choice
Expanding customer choice is a key driver of our e-commerce
ambitions. We are scaling and growing our marketplace capabilities
alongside our key partners Mirakl and Salesforce . B&Q's
e-commerce marketplace on diy.com is growing fast, following its
launch in March 2022. There are now approximately 750 carefully
selected 3P merchants live on diy.com , with products across all
home improvement categories, enabling B&Q to offer over 700k
additional home improvement SKUs*, compared to its previous
first-party (1P) offer of c.40k products. Marketplace participation
is growing quickly and reached 33 % in July 2023 (i.e., B&Q's
marketplace gross sales divided by B&Q's total e-commerce
sales). To accelerate our recruitment of top merchants, in H1 we
signed a strategic partnership with Octopia , one of the biggest
marketplace vendor aggregators in Europe. The partnership gives us
access to thousands of additional merchants globally.
Our marketplace proposition is strengthening our 1P business.
The diversity of SKUs offered by the marketplace is highly
complementary to our existing 1P offer, with bed frames and air
friers among our top-selling marketplace products in H1. This has
helped drive incremental sales. Over 30% of B&Q's marketplace
customers are new to diy.com . Furthermore, we saw that
approximately 10% of customers who purchased a 3P product
subsequently purchased a 1P product on diy.com . As the marketplace
matures and customers get more familiar with using it, we expect
this 'transference' rate to continue growing, increasing the
strategic value for our banners.
Kingfisher has developed its marketplace technology and
capabilities with low-cost scalability in mind. In November 2022,
we launched e-commerce marketplaces in Brico Dépôt Iberia. Early
growth has seen marketplace participation in Iberia reach 11 % in
July 2023 , driven by over 50k additional SKUs from around 80 3P
sellers. In Q1, our 50% joint venture, Koçta , also launched its
e-commerce marketplace, leveraging the technology built by
Kingfisher. We are now preparing to launch marketplaces in France
and Poland in 2024 within our existing banners in those
markets.
c) Build a data-led customer experience
We are accelerating the use of data within Kingfisher. Our
banners are leveraging data to build customer-centric tools and
solutions, support better commercial decision-making and higher
productivity, thereby unlocking significant new sources of revenue
and profit.
We are seeing strong results from our development of in-house
data and AI capabilities and are continuing to invest in these
areas. We have adopted more efficient ways of working to allow us
to test and learn quickly. Some approaches using more advanced
technologies are at the 'proof-of-concept' stage while others have
piloted successfully and are now being deployed to our banners.
We have now aligned our data strategy across four key pillars:
top-line growth, strengthening margin, streamlining operations and
new income streams.
Top-line growth
We have developed a suite of AI-powered in-house recommendation
and personalisation engines tailored to our markets and customers.
These solutions leverage data to offer the best product options in
multiple formats such as 'frequently bought together' carousels,
'substitute products' or direct personalised offers based on
customer shopping trends and preferences. The engines are already
live across multiple digital customer touchpoints (website and app)
at B&Q and Screwfix. Customer feedback has been very positive
with conversion rates increasing by over 100% in our early results,
and generating as much as 10% of B&Q's e-commerce sales. We
plan to extend these solutions to other banners from H2.
As mentioned above, in H1 we deployed new online CRM
capabilities by connecting our in-house ' Nucleus ' data platform
with Braze . This enables us to manage our customer relationships
more effectively through specific promotions and personalised
offers sent by email, SMS and in-app notifications. In H1, Screwfix
ran an app-based campaign offering incentives based on shopping
frequency, with very strong results. Braze was fully adopted by
Screwfix in H1, with plans to implement at B&Q in H2, followed
by other banners in FY 24/25.
Strengthening margin
We have developed AI-driven tools to support the optimisation of
our markdown and clearance processes in-store and online. The
algorithms have been designed to help us to achieve a higher
margin, increase the sell-through of seasonal stock, and improve
the efficiency of our range changes. Early pilots of the solution
at B&Q in H1 delivered a very encouraging gross margin
improvement on clearance products.
Streamlining operations
We have developed a supply chain visibility tool to provide our
banners with real-time and end-to-end visibility of products, as
they leave factories all the way to arriving at stores. We believe
the transparency over our supply chain networks will enable our
banners to reduce inventory levels and replenishment cycles by
optimising the time between products being ordered and arriving at
stores and distribution centres. This will result in higher product
availability, lower inventory days and, over time, less working
capital requirements and higher profitability. First versions of
the solution are now live in France, Iberia and Romania, and
already showing early success of reducing inventory levels while
also improving product availability.
New income streams
We believe there is a significant opportunity to create a
proposition for 3P vendors who want to purchase advertising through
retail media and use data to improve their offering. Earlier this
year we established a partnership with CitrusAd , a market-leading
technological solution that Kingfisher will use to manage the
advertising proposition for 3P vendors. This solution is already
active in Castorama France, with the intention to deploy to other
banners from H2 starting with B&Q. To accelerate our retail
media plans we have partnered with Unlimitail , a new European
retail media joint venture between Carrefour and Publicis , to
provide advertising sales support in the French market.
With c.1bn customer visits per annum across our e-commerce
touchpoints, Kingfisher is very well placed to benefit from this
opportunity. Along with our significant online traffic, many of our
suppliers - including leading national and international home
improvement brands - could become advertisers. Over time, we see
the potential for retail media revenues to reach up to 3% of the
Group's total e-commerce sales.
d) Differentiate and win through own exclusive brands (OEB)
We believe that our OEB product development is a significant
source of value for our retail banners and their customers. OEBs
provide us with the ability to differentiate ourselves from the
rest of the market by delivering simple and innovative solutions at
affordable prices, with a focus on reducing environmental impact.
OEBs also carry a higher gross margin (on average) than branded
products. We aim to grow our OEB sales further as we bring even
more innovative and affordable solutions to our customers.
Total OEB product sales were GBP3.1bn, representing 46% of Group
sales (H1 22/23: 46%). This is particularly impressive when
considering our retail banners' renewed focus on offering more
choice to customers through a wider range of local and
international branded products, including from our e-commerce
marketplace proposition. Kingfisher's top five OEBs, based on their
breadth of differentiated ranges, innovation and growth potential,
are GoodHome , Verve, Erbauer, Magnusson and Cooke & Lewis .
These contributed 21% of total Group sales (H1 22/23: 21%).
LFL sales of our OEB ranges in H1 were down 3.3 %, impacted by
the performance of outdoor and 'big-ticket' categories, the latter
having a higher weighting towards OEB . We saw a resilient
performance from OEB ranges within our EPHC (electricals, plumbing,
heating & cooling), tools & hardware and building &
joinery categories. Our recent OEB range reviews have landed well
with customers. The most successful range refreshes carried out in
the last 12 months were GoodHome painting tools, OEB paint
colour-mixing and ready-made paints, which have delivered sales
growth of c.9% from launch to 31 July 2023. In H1 we also saw good
performance of ranges launched in previous years, demonstrating
lasting brand strength and their strong resonance with customers
based on quality and value for money. In particular, our Erbauer
power tools, Volden and No Nonsense sealants, and Global Storage
Solution ranges were standout performers in H1, delivering average
sales growth of over 6%. Our industry-leading OEB design
capabilities continue to be recognised internationally, with our
Cascabel kitchen tap and Neva decking solutions both winning
prestigious Red Dot design awards in H1.
We continue to focus on OEB development with our three strategic
pillars in mind: innovation, affordability and reducing
environmental impact. All new product launches and range reviews
stringently address each of these three pillars.
Designing innovative products is a key requirement to make home
improvement projects easier for both retail and trade customers. We
do this through our deep understanding of customer needs at every
step of their home improvement journeys. We have developed our
innovation pipeline by analysing four customer home projects:
improving energy efficiency , reducing water usage , maintaining
& repairing the home and creating & improving the use of
space . Recent examples include our Klikstrom decking solution,
designed for easy installation without the need for tools and
screws, and our GoodHome paint tool range including a kickstand
feature, allowing decorators to minimise paint spillage while
setting down paint brushes. Developing our pipeline often takes the
form of range reviews, which involve iterating an existing
proposition through enhancements or new products, based on customer
needs and feedback.
With many households in our markets impacted by the rising cost
of living, this has strengthened our resolve to deliver affordable
prices to our customers by leveraging our OEBs. We aim for our OEB
products to be, on average, 15-30% cheaper than branded products.
For example, our GoodHome durable paints and Titan combi drills are
c.30% and c.45% cheaper respectively versus their equivalent
branded products, and are significantly outpacing them on sales
growth. We achieve this by maintaining strong range management
practices across the OEB offer, strengthening the offer in the
lowest selling price quartile and opening price points, and using
value engineering to gain manufacturing efficiencies and economies
of scale. For example, by sourcing components for our GoodHome
Beloya modular shower enclosures from different regions and
assembling in Europe, we'll be able to reduce its manufacturing
cost significantly.
We also continue to embed environmental considerations at the
core of the OEB proposition, all the way from the product design
and development phase, through to the procurement and manufacturing
phase. Our Sustainable Home Products (SHPs) aim to either help our
customers reduce the impact of their homes on the environment (such
as water-saving taps or loft insulation) or to reduce the impact on
the environment because of their input materials or how they are
manufactured (for example, FSC-certified timber, peat-free compost
or recycled plastic). Through our OEB team's design and development
work, we are focused on driving up product attributes that meet
these requirements. As an example, our new GoodHome paintbrush
handle and roller are manufactured with 100% recycled plastic, a
first in the industry. In H1 we launched Naturéa by GoodHome, our
first paint range containing resins made from renewable raw
materials (as opposed to fossil fuels). Naturéa paint also contains
minimal volatile organic compounds (VOCs) supporting better indoor
air quality. We are working with other OEB vendors to introduce
resins made from renewable raw materials and reduced VOC content in
their paint ranges. In FY 22/23, 56% of OEB product sales were SHPs
(FY 21/22: 55%). Please also refer to ' Lead the industry in
Responsible Business and energy efficiency' below for further
details on how we are using OEBs to drive further SHP growth, while
supporting our efforts to reduce our scope 3 emissions
footprint.
e) Develop our trade business
Trade customers are an integral part of the home improvement
ecosystem and a key priority for Kingfisher. Trade customers tend
to visit more frequently and spend more than the average retail
customer. The significant opportunities to engage further with
trade customers include the further roll-out of trade counters,
international expansion, digital enhancements, range expansion,
loyalty programme optimisation, improved merchandising, more
partnerships and new services.
Screwfix is the UK's number one 'light-trade' retailer. In H1,
the business continued to expand, opening 10 stores in the UK, two
in Ireland and four in France. Screwfix now operates 884 stores in
the UK & Ireland, and nine stores in France where it launched
in April 2021 (with its first store opening in October 2022). In
Q3, the business plans to launch Screwfix as a pure-play online
retailer in continental Europe. Please refer to 'Grow by building
on our different banners' above for further details.
The blueprint for our ambitions in 'heavier trade' is B&Q's
trade-focused banner, TradePoint. In H1, TradePoint delivered a
good sales performance against robust prior year comparatives, with
LFL sales down 1.8%. This brought the business to GBP424m of sales,
representing 20% of B&Q's total sales (H1 22/23: 21%).
TradePoint has a strong plan to drive its annual sales to more than
GBP1bn in the medium term, centred around growing its customer base
and increasing its share of trade customer spend through a greater
focus on project-related spend. The business is also increasingly
focused on growing its business-to-business (B2B) sales, catering
to trade federations, professional housebuilders and small and
medium-sized enterprises, with sales in this area up by over 30 %
YoY.
More broadly we believe there is a significant opportunity to
increase trade customer penetration across all other retail
banners. Our Trade 'Centre of Excellence' brings together experts
and leaders from across our banners and Group functions to share
knowledge, insights and feedback from customers, to develop our
trade business. We recognise the unique needs of trade customers
and align our trade strategy across six key pillars: stores, range
& price, people, services , loyalty and digital.
Within the stores pillar , we opened 18 new TradePoint counters
in H1, extending its presence within the B&Q store network to
207 (67% of stores). Some of these new counters include small
format solutions that have been implemented in B&Q stores
unable to cater for the full TradePoint proposition. We are also
continuing to update our legacy TradePoint counters, with 10 stores
refreshed during H1 and a further 20 remaining in H2. During the
half, Castorama Poland launched tests for ' CastoPro ' zones in
three of its stores, providing a dedicated space to bring together
key trade ranges and serve trade customers. In H2, Castorama Poland
will test dedicated trade entrances to store and drive-in builder's
yards, implementing best practices from TradePoint and Brico Dépôt
France. In Brico Dépôt France, we launched tests in 24 stores in H1
to provide a differentiated proposition to trade customers
including one dedicated trade colleague per store, trade service
desks and a dedicated contact number for immediate customer
service.
Within range & price , we are leveraging our strength in
OEBs to develop and launch trade-focused products for our banners,
while enabling low prices. As an example, we recently launched our
OEB Fortress paint tools ranges, with paints launching in the
coming months which will have higher durability than traditional
paints. We also tailored our Site workwear product lines to be more
suitable for female trade professionals. Our plumbing-focused OEB
Flomasta range continues to perform well in the UK with over 500
SKUs to support key plumbing and heating engineer needs, with
planned expansion into our other banners.
For people , we are piloting dedicated sales partner roles at
TradePoint to build more direct and personalised relationships with
trade customers. Over time we believe this will enable us to
capture a greater share of trade customer spend, while providing
feedback loops to help optimise our offer. At certain Brico Dépôt
France and Castorama Poland stores, we are trialling dedicated
colleagues to engage with trade customers, introduce them to
trade-specific benefits, and encourage sign-ups to their loyalty
programmes tests. At Brico Dépôt Iberia, our store colleagues are
empowered through data to proactively engage with trade loyalty
members. This is enabled through a customer 'dashboard', which
identifies customers based on frequency and amount of spend.
Colleagues receive alerts if such customers have not shopped in
their store for a period of time, prompting re-engagement with
personalised incentives.
In services , our tool rental partnerships with SpeedyHire (at
22 B&Q stores and online nationwide) and Loxam (at 41 Castorama
France stores) provide trade customers with heavy machinery and
tooling, delivered both in-store and nationwide via our digital
platforms. Following a successful trial, Castorama Poland has
expanded the trials of its CastoRent tool rental service, providing
low-cost access and increasing customer exposure to our Erbauer and
MacAllister brands. Payment facilities and cashflow are key
considerations for our trade customers to successfully operate
their businesses. In Brico Dépôt France, a new proposition for
deferred payment is currently in trial. Dedicated 3P financial
products for the trade are also being explored in Poland and
Iberia. Fulfilment is also of crucial importance to the trade, with
nationwide crane delivery being rolled out by Brico Dépôt France,
and direct-to-site delivery, next-day delivery and 'timed delivery'
slots all being tested and explored by the Group. Our responsible
waste services in partnership with AnyJunk and LoveJunk are
delivering positive results in the UK.
In loyalty , the TradePoint loyalty programme continues to be
attractive to trade customers, with new sign-ups increasing by 37%
YoY in H1. In Poland, we have been testing a variety of
propositions for our trade customers - for example a trade loyalty
scheme in 10 stores, with the aim of full roll-out next year. In
Brico Dépôt France, we are driving membership of our loyalty
programme through the offer of trade-specific benefits, and a 2%
cashback being trialled in 24 stores. The loyalty programme tests
in Brico Dépôt France are seeing encouraging early results,
delivering an increase in trade sales of up to 50%. Our BricoPro
loyalty programme in Iberia continues to grow successfully, with
colleagues empowered through data to proactively engage with trade
loyalty members. Sales to trade customers in Iberia have grown 50%
since loyalty programme launch, with 26% sales growth YoY just from
comparable customers.
Finally, in digital , Screwfix Sprint continues to deliver
essential items to trade customers within one hour, available
exclusively through the Screwfix app. Increased personalisation is
a key area for us, leveraging our expanding data and analytics
expertise to bring more relevant offers and content to known trade
customers. Please refer to ' Build a data-led customer experience'
above for further details.
f) Roll out compact store formats
Our home improvement banners operate approximately 1,980 stores
across eight countries in Europe. They play an integral role in
meeting the demand for fast fulfilment via e-commerce channels,
whether through C&C or delivery, to where the customer wants
it. Compact stores are also playing an increasingly crucial role in
addressing the consumer need for convenience. Through compact store
expansion, our ambition is to grow market share, optimise our
overall store footprint, and to grow sales densities and store
profitability.
As set out in the section above, 'Grow by building on our
different banners', a common denominator through the plans of many
of our businesses is that compact stores are a key enabler for
expansion. We are convinced of the need for a wider network of
smaller and more easily accessible stores, and believe compact
stores unlock the opportunity for rapid expansion into smaller
cities and geographic 'white spaces' where larger stores are not
suitable.
We are clear however that any space growth must be subject to
our strict returns criteria, and balanced as part of our overall
view on store footprint. While compact store growth will increase
our overall store numbers, our aim is to reduce the average size of
our stores. We aim to achieve this over time by opening more
compact stores (less than 2,000 sqm), rebalancing any larger size
new store opening programmes (e.g., at Brico Dépôt France and
Castorama Poland) to mostly focus on medium-box stores (2,000 to
8,000 sqm), and 'rightsizing' or repurposing space within many of
our larger format big-box stores (more than 8,000 sqm).
We continue to make good progress in testing different concepts
in different catchments to unlock the compact store opportunity. In
H1, we added one compact store, with a total of 34 such stores now
live across three markets and five retail banners (B&Q,
Screwfix, Castorama France, Brico Dépôt France and Castorama
Poland). The compact stores are in a variety of locations including
high streets, small retail parks, industrial estates and dense
urban areas.
Our high street concept tests (300-800 sqm) continue to deliver
encouraging learnings and results. We have 12 high street concept
stores open in the UK, France and Poland, including four stores
with two or more full years of trading. Following successful trials
in Palmers Green and Camden (both in London), the B&Q Local
sub-banner was rolled out to all eight B&Q high street stores
in H1. Similar concepts are being tested in Castorama France (three
Casto stores) and Castorama Poland (one Express store). In France,
our Castorama concept stores reorganised their kitchen, bathroom,
and storage project zones to give greater customer privacy and
improve customer traffic flow. Castorama France is also exploring
ways to extend the C&C range within their compact stores. At
B&Q, high C&C participation in high street stores (three to
four times higher than non-compact stores) have been a very
positive development, fully in line with the underlying principles
of our compact store strategy. Across all three markets, we
continue to iterate the store tests taking into account local
customer needs, as we create an optimum blueprint.
Our small retail park store concept tests (800-2,000 sqm) have
been live at B&Q since January 2020 and at Castorama Poland,
under the Castorama Smart sub-banner, since June 2021. The concept
allows us to bring our core offer into smaller footprints and
catchments, while offering a stronger showroom inspiration and more
complete project journey than is possible within high street
stores. We have a total of nine such stores in operation in the UK
and Poland, in a variety of sizes and locations. Overall, these
stores are yielding constructive learnings, especially those within
the 1,750-2,000 sqm subset. One of our key focus areas going
forward will be 2,000-4,000 sqm retail park stores that include a
garden centre offering, to better meet customer needs through a
greater depth of range and services.
In June, Brico Dépôt France launched its first compact store in
Cahors, France. The concept allows customers to access the entire
core Brico Dépôt range (c.11k SKUs) in an area of under 1,000 sqm,
with a separate space to allow larger and bulk purchases to be
collected. This innovative store format alleviates various pain
points in the customer journey, saving customers time and effort by
removing the need to take large or bulk items from shelves or
navigating aisles with heavily-loaded trolleys.
Finally, Screwfix continues to test its ultra-compact 'Collect'
and 'XSR' store formats, which have been developed to take the core
Screwfix range into spaces unable to cater for the full traditional
trade counter offer. We have one 'Collect' store (in London) and 11
'XSR' stores trading across various location types. We continue to
see positive results, especially at the 'Collect' format. We expect
to open two additional 'Collect' stores in H2 to further test the
performance of the format in dense urban areas.
g) Lead the industry in Responsible Business and energy efficiency
We are committed to leading our industry in responsible business
practices and energy efficiency. Building on our strong
Environmental, Social, and Governance (ESG) credentials, our
'Powered by Kingfisher' strategy sets out four priority areas for
Responsible Business where we can maximise our positive impact on
the lives of our customers, colleagues, communities, and the
planet. As the 'green homes' agenda accelerates, we see
considerable potential for our Sustainable Home Products.
Our priorities are underpinned by our commitment to 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, cybersecurity and data protection, and ethical conduct,
to ensure we take a consistent best practice approach across our
banners.
In H1 we continued to make strong progress against our four
Responsible Business priorities , with key updates noted below.
Colleagues: Becoming a more inclusive company
-- To deliver the best possible service to our customers and
ensure that each of our colleagues is engaged, fulfilled and able
to realise their full potential, we are building a culture based on
trust, agility, inclusion and curiosity, which we track through
frequent colleague engagement surveys and listening forums. Our
colleague satisfaction scores remain within the top 5% of worldwide
retailers. Please refer to ' Human, agile and lean' below for
further details.
-- We are continually listening to our colleagues, including our
17 Affinity Networks, and acting on their ideas to build a more
inclusive culture. To represent better the diversity of our
colleagues, earlier this year we launched a new Affinity Network
for our Group functions, focused on neurodiversity.
-- We continue to work towards our gender representation targets
of 40% women in management roles and 35% women in senior leadership
roles by FY 25/26. Encouraging progress has been made so far this
year against our annual targets. In the UK, our latest Gender Pay
Gap report, published in March 2023, showed a reduction in the
median hourly pay gap from 1.5% to 1.1%.
-- We are continuing to actively monitor the cost of living
across our markets, taking swift action where necessary to support
colleagues in our stores and head offices. For example, in the UK,
our minimum rate of pay for B&Q and Screwfix hourly paid retail
colleagues rose to GBP10.60 from 1 April 2023 - a respective
increase of 8.2% and 9.3% YoY. In Poland, colleagues received a
one-off cost of living payment in February 2023. Initiatives
introduced during FY 22/23, including our UK Colleague Support
Fund, remain in place. Our most recent Group-wide colleague
engagement survey showed that colleagues responded positively to
actions taken to support them with elevated costs of living, with
many of our banners reporting their highest scores for colleague
reward in the last three years.
-- We are investing in opportunities for colleagues to learn and
grow with us. Having surpassed our previous learning target of
providing 5 million hours of skills for life learning by 2025, we
have now established a new target: "by 2030, more than 20,000
colleagues will have completed an apprenticeship, traineeship or
external qualification". We will report progress against this
target at the end of FY 23/24. During H1, both B&Q and Screwfix
were listed in the Top 100 Apprenticeship Employers in the UK.
-- We also continue to invest in talent and capability to
support our growth ambitions, recruiting deep functional expertise
in key areas such as trade, e-commerce, marketplace, data, and
technology, including the creation of an in-house engineering
centre at our shared services facility in Krakow and the creation
of a new retail media team in France.
-- In the context of strong competition for talent in our
markets, our attrition levels, and the time it takes to hire new
colleagues remain either in line with, or better than, retail
industry benchmark levels. We believe this reflects our continued
investment in our employer brand, stronger colleague engagement,
and our focus on culture.
Planet: Helping to tackle climate change and becoming Forest
Positive
-- In July 2022, we announced a target to reach net-zero for our
own operations (scope 1 and 2 emissions) by the end of 2040.
Achieving this means reducing absolute emissions by at least 90%
against a FY 16/17 base year, and neutralising our residual
emissions, in line with the requirements of the Science Based
Targets initiative (SBTi) Corporate Net-Zero Standard.
-- Achieving our near-term 1.5degC-aligned science-based scope 1
and 2 carbon reduction target (approved by the SBTi in 2021) is the
first step towards achieving our net-zero targets by FY 40/41. The
target is to reduce emissions by 37.8% by FY 25/26.
-- Last year we exceeded this target, reducing our carbon
footprint from our own operations by 52.6% against FY 16/17. This
outperformance was achieved through a combination of accelerated
strategic measures (such as the extension of our programme to
purchase electricity from zero carbon sources) as well as
shorter-term tactical measures to reduce gas and electricity
consumption, some of which will likely reverse in the near
term.
-- Further actions taken so far this year include:
- Extending our COOLROOF heat reflective paint trial at Brico
Dépôt France, while exploring opportunities in other banners. For
one of our trials in France, the energy needed for air conditioning
reduced by over 40% in its first year.
- The continued roll-out of LED lighting in stores.
- The continued installation of air source heat pumps across our
Screwfix network in the UK. As of 31 July 2023, 547 of Screwfix's
884 stores were heated with air source heat pumps.
- The continued deployment of electric vehicles and fuels with a
lower environmental impact across our delivery fleets. Screwfix has
now replaced fossil fuel diesel with HVO (Hydrotreated Vegetable
Oil from certified renewable sources) in 85% of their delivery
fleet. Using HVO instead of diesel reduces a journey's carbon
emissions by up to 90%.
-- Our 1.5degC-aligned scope 3 target requires us to achieve a
40% reduction (per GBP'million turnover) from purchased goods and
services and use of sold products by 2025, against a FY 17/18 base
year. Our efforts are focused on raw materials used in the
manufacturing of our products, emissions from the manufacturing
process, and emissions from customer use of our products.
-- By the end of FY 22/23, we had reduced the intensity of our
emissions from the supply chain and customer use of products by
34.1% since FY 17/18 (FY 22/23: 19.7%), meaning we are on track to
meet our target of 40% by 2025.
-- In H1 we chose to partner with other home improvement
retailers through the EDRA/GHIN global trade bodies to establish a
collaborative taskforce to help the sector reduce its scope 3
emissions.
-- Kingfisher has a strong heritage in sustainable forestry and
the responsible sourcing of wood and paper. In line with our
commitment to be 'Forest Positive' by 2025:
- In FY 22/23, 94% of the wood and paper used in our products
was responsibly sourced (FY 21/22: 87%), and 100% of catalogue
paper. We are on track to achieve our target of 100% by FY
25/26.
- In H1 we launched several local projects in the UK, France,
and Poland to promote sustainable forestry. Screwfix and B&Q
supported a Woodland Trust project in Snaizeholme, UK, by donating
c.GBP100k to enable the Woodland Trust to begin surveying the area
ready for planting new native sapling trees. In addition, Castorama
France partnered with Reforest'Action to create an urban forest in
Marseille, helping to plant over 1,000 local trees and shrubs.
Customers: Helping to make greener, healthier homes
affordable
-- In FY 22/23, GBP6.2bn of sales, representing 47% of Group
sales (FY 21/22: 44%), were from Sustainable Home Products (SHPs).
This has more than doubled since we established the programme in FY
11/12, and our target is to reach 60% by FY 25/26.
-- In addition, 56% of OEB product sales were SHPs (FY 21/22:
55%), with a target of 70% by FY 25/26.
-- We continue to embed environmental considerations at the core
of our OEB proposition, from the product design and development
phase, all the way through to procurement and manufacturing.
Examples include:
- Phasing out peat-based compost at B&Q (Kingfisher's
biggest seller of compost by volume). We're now working to remove
peat from all our OEB bagged-compost across the Group.
- Removing solvents from further paint lines (e.g., through the
launch of Naturéa , Kingfisher's first bio-based paint).
- Increasing the use of recycled plastic in product packaging.
-- An important subset of our SHPs are our energy and
water-saving products. In FY 22/23, these represented 11% of Group
sales. We see considerable longer-term potential across all our
markets as the 'green homes' agenda accelerates, in particular in
the UK and France, where both governments have made 'net-zero'
commitments.
-- Energy efficiency and water-saving products continue to be a
focus for customers as they look to reduce the impact of their
homes on the environment. In H1, highlights included insulation
roll sales at B&Q up 43%, Screwfix insulation sales (within
plumbing) also up 43%, and water-saving plumbing product sales at
Castorama France up 8%.
-- We are developing opportunities to further increase our
engagement with retail and trade customers in this area, with
examples including:
- Launching a water-saving campaign earlier this year, sharing
tips and advice to help customers and colleagues use water more
efficiently at home.
- Expanding our range of OEB energy-saving products to support
customers in improving energy efficiency at home, while helping
them to save money.
- Brico Dépôt France working with installation partner Ynergie
to offer home energy audits, which include tailored recommendations
on how to improve energy efficiency. Brico Dépôt customers who
implement the recommended renovations with Ynergie get their audit
for free.
- B&Q launching a free energy-saving service in partnership
with the Energy Savings Trust. Alongside our energy-saving product
recommendations, the service incorporates partnerships with
organisations to handle bigger installations including boiler
replacements, solar panels, and roof and interior/exterior wall
insulation.
Communities: Fighting to fix bad housing
-- Last year we invested GBP 5.4 m in our communities, with our
colleagues and customers raising an additional GBP 2.8 m. We
reached almost 500,000 people through our charitable partnerships
and banner Foundations. This brought our total to 2.1 million
people helped since FY 16/17, thereby achieving our target of 2
million people three years ahead of schedule.
-- All our banners have established charitable Foundations. The
Foundations partner with national charities including Shelter and
Macmillan in the UK, Fondation Abbe Pierre in France, and Habitat
for Humanity in Poland and Romania.
-- This year, the S crewfix Foundation celebrated its 10(th)
anniversary, having raised over GBP10m since launch with nearly
2,200 organisations receiving a donation.
-- The Brico Dépôt Romania Foundation received an award in the
'Supporting Communities' category of the 2023 Romanian CSR Awards
Gala for the 'Hope build' project, overseen by Habitat for
Humanity, which saw new homes built to re-house four families.
Governance and Reporting
The Responsible Business Committee (RBC) of Kingfisher's Board
oversees the delivery of our Responsible Business strategy. It
provides advice and assurance to the Group Executive and the Board
on all matters relating to responsible business practices, and
monitors performance against our priorities. The RBC is chaired by
Sophie Gasperment, a non-executive director (NED) of the Board, and
includes a further NED, our Group CEO, and other members of the
Group Executive.
The Group Climate Committee (GCC), a sub-committee of the Group
Executive, monitors the Group's approach to meeting its emission
reduction commitments for 2025 and 2040, climate-related external
reporting, and assessing and managing climate-related risks. The
GCC is chaired by our Group CEO and includes other members of the
Group Executive.
Responsible Business measures are integrated into our long-term
incentive plan (known as the Kingfisher Performance Share Plan),
which is granted to members of our senior leadership team. The
performance conditions attached to the vesting of awards include a
25% weighting on ESG measures. Please refer to our 2022/23 Annual
Report for further information.
Kingfisher has a GBP550m sustainability-linked revolving credit
facility, which enables us to benefit from a lower interest rate
when we deliver on ambitious sustainability and community-based
targets under the Group's Responsible Business plan.
We align our reporting with the Sustainability Accounting
Standards Board (SASB) standards for Multiline and Speciality
Retailers and Distributors, and the Global Reporting Initiative
(GRI). Furthermore, we are developing 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 2022/23 Annual Report.
In June 2023, we published our 2022/23 Responsible Business
Report, detailing the progress we have made across the four
priorities of our Responsible Business strategy. Additionally, we
published our inaugural Responsible Business Databook which
captures current and historical data, as well as performance
against our priorities.
We continue to rank highly in external benchmarks and indices,
including:
-- MSCI: We rank as a 'Leader', having received a 'AAA' score,
which was achieved by only 6% of companies in the Retail - Consumer
Discretionary sector (as of July 2023).
-- CDP Climate Change: We achieved a leadership score of 'A'
(previously 'A-'). We are amongst nearly 300 companies globally to
achieve an 'A' grading in 2022, and we score higher than the
average discretionary retail performance of a 'C'.
-- Sustainalytics: We continue to rank highly when compared
against our sector peers - ranked second out of 45 in home
improvement retail and second out of 502 in the wider retailing
industry (as of April 2023).
-- Workforce Disclosure Initiative: We received a disclosure
score of 81%, ahead of the average consumer discretionary sector
score of 66% and average disclosure score (all companies) of
68%.
-- ISS ESG Corporate Rating: We achieved a 'C+' rating. This is
supported by our 'Prime' status, which is given to companies that
are perceived to be sustainability leaders in their industry (as of
July 2023).
-- FTSE4Good: Kingfisher is included in this index, with a
rating of 4.3 out of 5 (Strong performance), as of June 2023: The
home improvement retailer sub-sector average score is 2.7.
For further information on our strategy, performance and
governance, please visit the Responsible Business section of our
website at www.kingfisher.com , and our 2022/23 Responsible
Business Report.
h) Human, agile and lean
To deliver the best possible service to our customers and ensure
our colleagues are engaged, fulfilled and able to realise their
full potential, we are building a culture based on trust, agility,
inclusion and curiosity. We are adopting a 'done is better than
perfect' mindset to move faster and with more agility, given the
rapidly changing environment in which we do business. We also
realise the need to be leaner and more productive, and are making
changes to lower our costs and same-store inventories. And through
the use of our scale, we expect to extract further value from
sourcing and buying.
Human
To support an agile and inclusive culture led by trust, we are
continuing to listen to our colleagues and measure their engagement
across the Group, through formal and informal mechanisms. These
include our 17 Affinity Networks and the Kingfisher Colleague
Forum.
We conducted our most recent Group-wide colleague engagement
survey in June 2023. We heard from 87% of colleagues (up 4% YoY),
with colleagues sharing 280,000 comments. Our Employee Net Promoter
Score (eNPS) of 57 improved by three points YoY. All banners are
now running at least two colleague surveys a year, enabling better
visibility of colleague engagement throughout the year.
Good progress continues to be made on delivering our inclusion
plans. Last year, we established a new 'Inclusion & Diversity
Forum', chaired by the Screwfix CEO, bringing together senior
leaders and representatives from our Affinity Networks to share
best practices and further develop our action plans. In H1,
Kingfisher won an award from the Women in Tech Employer Awards, in
the Best Employer Network Category, for promoting inclusion through
our Affinity Networks. Our LGBTQ+ Affinity Network was shortlisted
in the Diva Awards and the Bank of London Rainbow Honours , and
several of our banners participated in Pride celebrations across
our markets.
Agile
Kingfisher 'Centres of Excellence' in supply chain, trade,
compact stores, services, data, technology, and e-commerce &
marketplace continue to provide technologies, resources and best
practices to ensure our banners can move with speed and agility.
For example, Castorama Poland and Brico Dépôt France drew upon key
learnings from TradePoint to launch their respective trade-oriented
trials in H1, and Brico Dépôt Iberia and Romania built upon
learnings from the introduction of our new supply chain visibility
tool in France to quickly and successfully implement the solution
in their respective operations.
We continue to focus on further strengthening our capability in
key areas to support the delivery of
our strategy. For example, our strategic partnership with Google
for cloud data has strengthened our technology services by enabling
a multi-cloud strategy, while maintaining partnerships with Amazon
Web Services and Microsoft Azure. These partnerships are enabling a
seamless migration from traditional data centres to the cloud,
leading to enhanced speed, performance and resilience of our
technology systems.
Lean - costs
As part of our multi-year strategic cost reduction programme, we
are making good progress across multiple initiatives covering store
productivity, goods not for resale (GNFR*), supply and logistics,
overheads, and property (including lease renegotiations and
rightsizings). These programmes are robustly governed at both Group
Executive and Board level.
The net savings from these programmes continue to partly offset
the costs of inflation, expansion and space changes, and the
investment requirements of our business over the medium term. They
are also key to unlocking targeted profitability improvements in
France. In H1, we made progress in several areas:
-- Store productivity - We are continuously optimising store
operating models through the improvement of operating procedures
and the use of technology. Across all our banners we are
redesigning processes and enhancing systems to improve the time
taken to complete tasks such as picking, collection, and
replenishment. Additionally, we are leveraging improved
benchmarking and forecasting to support more flexible workforce
planning. We have seen increased customer adoption of self
-checkout terminals across B&Q, Castorama France and Castorama
Poland. This has enabled colleagues to be redeployed to other areas
of the store, including picking for e-commerce orders.
Self-checkout terminals are currently being piloted in Brico Dépôt
France and Iberia. During H1 we deployed various initiatives to
improve stock shrinkage, including strengthening entrance/exit
security, product tagging and the secure storage of high-value
items.
-- GNFR optimisation - Category managers with Group-wide
responsibilities and local procurement teams continue to optimise
c.GBP2.7bn of GNFR spend through over 240 cost reduction projects.
Examples of our successful cost reduction projects in H1 include
the review of our operating models and ways of working in cleaning
and security services. The Group also realised lower IT hosting
costs through our strategic partnership with Google.
-- Supply and logistics - Kingfisher's supply and logistics
teams continue to optimise the operational efficiency of our
distribution centre and logistics networks. In Poland we have
secured more favourable rates for cross-docking logistics. Major
improvements are being realised in the UK through the increased use
of automation at Screwfix's flagship site in Trentham. 26% of the
Trentham centre is now using automated technology, leading to a
245% improvement in DC pick rates, generating meaningful cost
savings for Screwfix.
-- Overheads - Savings were realised across Group and banner
head offices, including through the expanded use of our shared
service centre (SSC) in Krakow, Poland. During H1, our SSC expanded
its software engineering and data capabilities, facilitating a
lower level of reliance on more expensive third-party contractors.
Our SSC was also able to reduce costs through greater use of
automation - for example, using bots to analyse and chase overdue
accounts receivables.
-- Property - Excluding Screwfix, the Group completed seven
lease renewals and renegotiations in H1, with an average net rent
reduction of 19 % alongside improved lease terms. In addition, our
rightsized big-box stores continue to deliver positive results. As
a reminder, we completed four rightsizings in FY 22/23 at B&Q,
further to the five completed in FY 21/22 at B&Q and Castorama
France. These rightsizings resulted in an average space reduction
of c.30%, which in general has been taken over by grocery retailers
, thereby bringing incremental footfall to the vicinity of the
stores. Since reopening, the stores have exceeded our performance
expectations, with sales density improvements of up to 50%,
improved profitability, and reductions in energy consumption of
over 50%. Our plan remains to rightsize up to 40 big-box stores
across B&Q and Castorama France over 10 years. 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.
In addition to our more structural cost reduction programmes, we
remain committed to the active and responsive management of costs
against the backdrop of an uncertain market growth environment in
the near term. Such cost actions include reducing temporary staff
numbers and overtime, flexing performance-related incentive
payments to align to financial performance, and adjusting more
discretionary spend such as advertising, marketing and staff
travel. Other measures include rephasing investments in store
openings and range reviews, as necessary.
Lean - inventories
Structurally reducing our inventory levels and improving
inventory turn is a major priority for Kingfisher over the medium
term. To unlock efficiencies in our supply chain and inventory
management, all our banners are deploying actions to structurally
reduce same-store inventory. We are doing this by leveraging data
to improve our planning and forecasting, optimising our
replenishment systems (e.g., re-adjusting for shorter supplier
lead-times), and developing stronger ranging and deployment
principles (with a focus on reducing slow-moving inventory). For
example, as described in 'Build a data-led customer experience', in
H1 we developed and implemented a supply chain visibility tool to
provide our banners with real-time visibility of our end-to-end
supply chain, which we believe will significantly strengthen our
planning and stock management capabilities over time.
Notwithstanding these medium-term ambitions, last year our
priorities were to rebuild product availability for our customers,
including through the purchase of 'buffer' stock, as well as
managing significant input cost inflation. Managing inflation,
especially in the earlier part of 2022, involved proactively
purchasing stock (mainly seasonal product) ahead of forecast cost
price increases. As of 31 January 2023, over 100% of the increase
in our net inventory balance was driven by product cost inflation,
with additional drivers including the seasonal and 'buffer' stock
mentioned above. This was partially offset by our inventory
reduction initiatives, which also led to inventory in units
(volume) being down YoY.
As previously guided, our aim during this financial year is to
sell through a large part of our seasonal and 'buffer' stock, while
continuing to implement efficiency actions around our supply chain
and logistics network. Despite lower than expected seasonal
category sales in H1, we are on track for our net inventory balance
to decrease in FY 23/24.
As of 31 July 2023, same-store net inventory* was 3% (GBP98m)
lower YoY in constant currency. Total net inventory decreased by 2%
(GBP78m) to GBP3,132m (H1 22/23: GBP3,210m in constant currency;
GBP3,138m in reported rates). This was driven by lower purchasing,
a reduction in seasonal and 'buffer' stock, and strategic reduction
initiatives; partially offset by product cost inflation.
As of 31 July 2023, inventory in units (volume) was down 11%
YoY. In parallel, our overall and 'best seller' product
availability significantly improved YoY in H1. Net stock days
increased by 5% YoY in H1.
Sourcing
In sourcing and buying, we continue to deliver cost and
operational efficiencies by leveraging our Group scale. Our
sourcing teams are working closely with our OEB teams on value
engineering projects, including simplifying the design of products
and optimising the end-to-end manufacturing of product components
to reduce per-unit manufacturing costs. Through this approach we
continue to deliver sourcing benefits on our large OEB product base
(46% of Group sales in H1).
We are also increasing the resilience of our supply chain by
increasing our 'near-sourcing' footprint and engaging in dual
sourcing where possible.
In June, we established a procurement joint venture between
Kingfisher's banners in France and Mr. Bricolage Group. Ahead of
the FY 24/25 financial year, the joint venture is now preparing for
commercial negotiations with common national and international
suppliers, aiming to strengthen relationships and deliver
additional value and new business opportunities for these
suppliers. Mr. Bricolage Group has over 1,000 stores through
franchisees and affiliates, mainly in France, with EUR2.35bn of
gross sales under its different banners in 2022, and is the fourth
largest player in the French home improvement market.
Medium - term financial and capital allocation priorities
Medium-term financial priorities
Our medium-term financial priorities reflect our continued
confidence in the growth and cash generation opportunity of
Kingfisher.
Building on our industry's attractive growth profile, which is
supported by more recent positive longer-term trends (such as more
working from home and energy efficiency renovations), the Group's
medium-term financial priorities are:
-- Sales to grow ahead of our markets:
- LFL sales growth driven by our strategic focus areas including
e-commerce and marketplace sales growth, OEB sales growth and
higher trade customer penetration; and
- Sales impact of +1.5% to +2.5% from annual net space growth
over the medium term, primarily driven by Screwfix and Castorama
Poland
-- Adjusted pre-tax profit to grow faster than sales:
- Supported by scale benefits, higher margin initiatives ,
operating cost leverage, and multi-year operating cost reduction
opportunities
-- Strong cash generation to drive growth investment and shareholder returns:
- Free cash flow of GBP400m to GBP500m in FY 24/25, followed by
>GBP500m per annum from FY 25/26, supported by profit growth and
ongoing inventory self-help measures
Capital allocation priorities
The Group's objectives in managing capital are to:
-- Invest in the business where economic returns are attractive
-- Maintain a solid investment grade credit rating
-- Safeguard the Group's ability to continue as a going concern
and retain financial flexibility
-- Provide attractive returns to shareholders
We allocate capital, subject to strict returns criteria, to
organic and 'bolt-on' inorganic growth opportunities that
accelerate our strategy. Our target gross capital expenditure is
3.0-3.5% of total sales per annum, on average, focused on
delivering against attractive organic growth opportunities.
To maintain a solid investment grade credit rating, our maximum
net debt to EBITDA is 2.0 times over the medium term. To retain
financial flexibility, we aim to maintain strong liquidity headroom
(including cash, cash equivalents and committed debt facilities),
which is currently set at a minimum of GBP 800 m. Total liquidity
as of 31 July 2023 includes an undrawn revolving credit facility of
GBP 550 m and cash of GBP317m (net of bank overdrafts).
Our target ordinary dividend cover* range is 2.25 to 2.75 times,
based on adjusted basic earnings per share. We may move outside of
this target range, temporarily, from time to time. Overall, our aim
is to grow the ordinary dividend progressively over time. If
surplus capital remains after having achieved all the above
objectives, the Board will return surplus capital to shareholders
via a share buyback programme or special dividends.
Interim ordinary dividend
The Board has declared an interim dividend of 3.80 pence per
share, flat versus the H1 22/23 interim
dividend of 3.80 pence per share. The interim dividend will be
paid on 17 November 2023 to shareholders on the register at close
of business on 13 October 2023. 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 12 October 2023. The last date for receipt of DRIP elections is
27 October 2023.
New GBP300m share buyback programme
In line with our capital allocation policy, the Board has
determined that there is surplus capital available. Further to the
ordinary dividend and the recently completed GBP300m share buyback
(as announced on 16 August 2023), the Board is pleased to announce
the return of a further GBP300m of surplus capital via a share
buyback programme. The first tranche of this programme will begin
in early October.
Section 3: Trading review by division
Note: all commentary below is in constant currency.
UK & IRELAND
GBPm H1 2023/24 H1 2022/23 % Reported Change % Constant % LFL
Currency Change
Change
B&Q 2,101 2,082 +0.9% +0.8% +1.0%
----------- ----------- ------------------ ----------- --------
Screwfix 1,245 1,139 +9.3% +9.2% +3.1%
----------- ----------- ------------------ ----------- --------
Total sales 3,346 3,221 +3.9% +3.8% +1.7%
----------- ----------- ------------------ ----------- --------
Retail profit 306 339 (9.8)% (9.8)%
----------- ----------- ------------------ -----------
Retail profit margin % 9.2% 10.5% (130)bps (130)bps
----------- ----------- ------------------ -----------
Kingfisher UK & Ireland sales increased by 3.8% (LFL +1.7%)
to GBP3,346m. The LFL sales trend accelerated from -0.8% in Q1 to
+4.1% in Q2, supported by a significant improvement in seasonal
category sales due to more favourable weather in May and June,
although momentum was affected by unseasonal weather in July. Core
and 'big-ticket' category sales were also positive, and accelerated
from Q1, supported by an improving volume trend. A resilient
performance in DIY categories was outpaced by sales from DIFM/trade
categories, with Screwfix gaining significant market share in H1.
Gross margin % was flat versus prior year, reflecting the effective
management of inflation and favourable channel mix impacts, offset
by higher clearance costs and stock provisions. Positive channel
mix reflects the strong growth of B&Q's e-commerce
marketplace.
Retail profit decreased by 9.8% to GBP306m (H1 22/23: GBP339m,
at reported rates), due to higher operating costs. Operating costs
increased by 8.9%, driven by cost inflation, including YoY
increases in staff and energy costs, higher technology spend, and
higher costs associated with 59 net new store openings (YoY). Cost
increases were partially offset through reductions achieved by our
strategic cost reduction programme. Retail profit margin %
decreased by 130 basis points to 9.2% (H1 22/23: 10.5%).
B&Q total sales increased by 0.8% (LFL +1.0%) to GBP2,101m,
with LFL sales growth in its surfaces & décor and tools &
hardware categories. Sales trends improved significantly in Q2 (LFL
+3.3% vs Q1 -1.6%), supported by strong seasonal category sales in
May and June. Core and 'big-ticket' category sales growth were
positive in both Q1 and Q2, with an acceleration from Q1 supported
by an improving volume trend. B&Q's total e-commerce sales
(including marketplace gross sales) increased by 18.5% YoY, driven
by the continued success of B&Q's marketplace as it attracts
new customers to diy.com. Marketplace reached a penetration of 33%
in July 2023 (i.e., B&Q's marketplace gross sales divided by
B&Q's total e-commerce sales). B&Q's overall e-commerce
sales penetration was 12% (H1 22/23: 11%; H1 19/20: 5%). The
business opened one small retail park format store in H1 and closed
all eight of its 'grocery concession' stores. As of 31 July 2023,
B&Q had a total of 309 stores in the UK and Ireland.
B&Q's trade-focused banner, TradePoint , delivered a good
performance in the half against robust prior year comparatives. LFL
sales for TradePoint were down 1.8%, with penetration of B&Q
sales reducing slightly to 20% (H1 22/23: 21%). Sales were impacted
by a proactive decision to switch off trade instant vouchers during
'big-ticket' promotional events, in support of profitability and
investment in promotions on the retail side of B&Q.
Notwithstanding this, TradePoint's loyalty programme remains
attractive to customers, with new sign-ups in H1 increasing by 37%
YoY. During the half, the business focused on increasing customer
engagement and loyalty through trade-only offers, special events,
and enhanced services such as dedicated sales partners for trade
customers. TradePoint is also increasingly focused on growing its
business-to-business (B2B) sales, catering to trade federations,
professional housebuilders and small and medium-sized enterprises,
with sales in this area up by over 30 % YoY. TradePoint opened 18
new counters in H1, extending its presence within the B&Q store
network to 207 stores (67% of stores).
Screwfix total sales increased by 9.2% (LFL +3.1%) to GBP1,245m,
with robust demand from trade customers driving growth in all
categories, in particular in building & joinery, tools &
hardware and surfaces & décor. Sales trends accelerated in Q2
(LFL +5.6% vs Q1 +0.7%), supported by an uptick in both its core
and 'big-ticket' categories as well its seasonal categories. The
business gained significant market share in the half. Screwfix's
e-commerce sales increased by 3.9% YoY, with e-commerce sales
penetration of 58% (H1 22/23: 60%; H1 19/20: 32%). The business
continued to build on the success of its mobile app, the fastest
growing channel at Screwfix, by running app-only campaigns and
integrating personalised and trade-exclusive offers. The app
delivered a record performance in the half, including record app
revenue in a month and record app participation rates, reaching 2
million monthly active users.
Space growth and acquisitions contributed c.6% to total Screwfix
sales. In H1, Screwfix opened 12 new stores, including 10 in the UK
and two in Ireland, bringing its total to 884 as of 31 July 2023.
The business continues to plan for up to 60 new stores in the UK
& Ireland in FY 23/24, keeping it on track to reach its
medium-term goal of over 1,000 stores.
In March, the business acquired the stock, intellectual
property, contracts and fixed assets of Connect Distribution
Services Limited (renamed Screwfix Spares), a leading retailer of
appliance spares, accessories and consumables to tradespeople and
consumers. Since acquisition, Screwfix Spares has performed in line
with expectations, contributing c.1.2% to total Screwfix sales
growth. The business expects to accelerate its sales in H2 and
start generating profits by the end of the year.
Further progressing its international expansion plans, Screwfix
opened four stores in France in H1 (with nine stores open in
total), and plans to open up to 20 stores in FY 23/24. Customer
momentum is building and the business continues to grow brand
awareness, both regionally and nationally. The early results in
France have encouraged us to take the next step in Screwfix's
international expansion journey. In Q3 , we intend to launch
Screwfix as a pure-play online retailer in continental Europe
(under the domain name screwfix.eu), serving up to 20 European
countries. The results for Screwfix International are captured in
'Other International' - see below for further information.
FRANCE
GBPm H1 2023/24 H1 2022/23 % Reported Change % Constant % LFL
Currency Change
Change
Castorama 1,213 1,207 +0.5% (2.7)% (2.7)%
----------- ----------- ------------------ ----------- --------
Brico Dépôt 1,098 1,118 (1.8)% (5.0)% (5.0)%
----------- ----------- ------------------ ----------- --------
Total sales 2,311 2,325 (0.6)% (3.8)% (3.8)%
----------- ----------- ------------------ ----------- --------
Retail profit 104 129 (19.3)% (21.9)%
----------- ----------- ------------------ -----------
Retail profit margin % 4.5% 5.6% (110)bps (100)bps
----------- ----------- ------------------ -----------
Kingfisher France sales decreased by 3.8% (LFL -3.8%) to GBP
2,311 m, with trading impacted by a challenging consumer
environment and unseasonal weather conditions throughout the half.
In Q1, national strike action caused lower direct footfall into
several Brico Dépôt store locations, with the weather affecting the
performance of seasonal categories . The LFL sales trend improved
slightly in Q2 (LFL -3.5% vs Q1 -4.1%), with a small uplift in
seasonal category sales. Encouragingly, core and 'big-ticket'
category sales performed well throughout the half, particularly at
Castorama. Gross margin % decreased by 30 basis points, largely
reflecting the higher weighting of sales towards special promotions
('arrivages') at Brico Dépôt, and higher clearance costs.
Retail profit decreased by 21.9% to GBP104m (H1 22/23: GBP129m,
at reported rates), with lower gross profit somewhat offset by
lower operating costs. Operating costs decreased by 1.5% due to the
flexing of variable costs, and reductions achieved by our strategic
cost reduction programme. This was substantially offset by cost
inflation, including YoY increases in pay rates and energy costs,
together with higher technology spend. Retail profit margin %
decreased by 100 basis points to 4.5% (H1 22/23: 5.6%, at reported
rates).
Castorama total sales decreased by 2.7% (LFL -2.7%) to GBP1,213
m, a resilient performance against a challenging consumer backdrop
. Sales trends improved in Q2 (LFL -2.3% vs Q1 -3.1%), largely
driven by improvements in core and 'big-ticket' category sales,
with positive LFL growth in surfaces & décor, building &
joinery and tools & hardware. Seasonal sales improved slightly
in Q2 but continued to be impacted by the weather. In H1, Castorama
improved its online customer journey and further extended its
customer offer, leading to an improvement in both store and online
NPS scores. Castorama's e-commerce sales increased by 6.9% YoY,
with e-commerce sales penetration of 6% (H1 22/23: 5%; H1 19/20:
2%). As of 31 July 2023, Castorama had a total of 95 stores in
France.
Brico Dépôt total sales decreased by 5.0% (LFL -5.0 % ) to
GBP1,098m, a weaker performance relative to Castorama. Overall
sales trends in Q2 were similar to Q1 (LFL -4.8% vs Q1 -5.2%), with
a small improvement in seasonal category sales due to the weather.
In Q2, performance was impacted by a reallocation of a portion of
its marketing budget to digital, which proved unsuccessful and has
been corrected since mid-July. The business also saw lower
cross-selling from its special promotions (or 'arrivages'). In H1,
Brico Dépôt launched trade proposition trials in 24 stores,
including a 2% cashback offer for trade customers, and implemented
changes to its website which enabled a 30% improvement in its speed
and page-load times. Brico Dépôt's e-commerce sales increased by
20.2% YoY, the fastest e-commerce sales growth rate of all banners
in the Group. E-commerce penetration reached 5% (H1 22/23: 4%; H1
19/20: 2%). During the half, the business also opened its first
ever compact store - an innovative 1,000 sqm format. As of 31 July
2023, Brico Dépôt had a total of 124 stores in France.
OTHER INTERNATIONAL
H1 2023/24 H1 2022/23 % Reported Change % Constant % LFL
Currency Change
Change
Sales (GBPm)
----------- ----------- ------------------ ----------- --------
Poland 880 913 (3.6)% (8.5)% (10.9)%
----------- ----------- ------------------ ----------- --------
Iberia 200 196 +2.0% (1.2)% (1.2)%
----------- ----------- ------------------ ----------- --------
Romania 137 145 (5.2)% (8.4)% (4.9)%
----------- ----------- ------------------ ----------- --------
Other (+/-) 6 9 n/a n/a n/a
----------- ----------- ------------------ ----------- --------
Other International 1,223 1,263 (3.1)% (7.5)% (8.8)%
----------- ----------- ------------------ ----------- --------
Retail profit (GBPm)
----------- ----------- ------------------ -----------
Poland 35 94 (62.5)% (64.4)%
----------- ----------- ------------------ -----------
Iberia 3 6 (48.7)% (50.3)%
----------- ----------- ------------------ -----------
Romania (10) (4) n/a n/a
----------- ----------- ------------------ -----------
Other (+/-) (10) (13) n/a n/a
----------- ----------- ------------------ -----------
Turkey (50% JV) 5 4 n/a n/a
----------- ----------- ------------------ -----------
Other International 23 87 (73.8)% (74.6)%
----------- ----------- ------------------ -----------
Retail profit margin %
----------- ----------- ------------------ -----------
Poland 4.0% 10.3% (630)bps (630)bps
----------- ----------- ------------------ -----------
Other International 1.8% 6.8% (500)bps (490)bps
----------- ----------- ------------------ -----------
(+/-) 'Other' consists of the consolidated results of Screwfix
International, NeedHelp, and results from franchise agreements.
Other International total sales decreased by 7.5% (LFL -8.8%) to
GBP1,223m, reflecting tough prior year comparatives across all
geographies (H1 22/23 LFL +19.5%). Retail profit decreased by 74.6%
to GBP23m (H1 22/23: GBP87m, at reported rates), largely reflecting
the retail profit decline in Poland. Retail profit margin %
decreased by 490 basis points to 1.8% (H1 22/23: 6.8%, at reported
rates).
Poland total sales decreased by 8.5% (LFL -10.9%) to GBP880m,
against strong prior year comparatives (H1 22/23 LFL +25.9%) and a
challenging trading environment. Overall sales trends in Q2 were
similar to Q1 (LFL -11.5% vs Q1 -10.3%), with ongoing macroeconomic
challenges in the country leading to a deterioration in consumer
sentiment and lower than expected market growth. On a two-year
basis, Castorama's sales grew faster than the market (as measured
by GfK). Performance was weak across both core and 'big-ticket' and
seasonal categories, with sales from the DIY customer segment
outpacing DIFM and trade. Space growth contributed c.2% to total
Poland sales. In H1, Castorama opened one medium-box store,
bringing its total to 98 stores in Poland as of 31 July 2023.
In line with the business' longer-term objectives, Castorama
continued to develop its trade proposition, launching tests for '
CastoPro ' zones in three of its stores, providing a dedicated
space to bring together key trade ranges and serve trade customers.
Castorama's e-commerce sales decreased by 33.8% YoY, following some
temporary disruption arising from the implementation of its new
digital technology stack in Q2. E-commerce sales penetration was 4%
(H1 22/23: 5%; H1 19/20: 2%).
Gross margin % decreased by 170 basis points, largely reflecting
higher customer participation in promotional activity, higher
clearance, and sales mix. Retail profit decreased by 64.4% to
GBP35m (H1 22/23: GBP94m, at reported rates) due to a lower gross
profit and an increase in operating costs. Operating costs
increased by 9.3%, driven by cost inflation (including YoY
increases in pay rates and energy costs), higher technology spend,
higher costs associated with five new store openings (YoY), and
charges related to ineffective foreign exchange hedges. Increases
were partially offset through reductions achieved by our strategic
cost reduction programme. Retail profit margin % decreased by 630
basis points to 4.0% (H1 22/23: 10.3%, at reported rates).
As a result of our performance in H1 and the trading environment
in the country, we are proactively managing our operating costs. In
H2, the business will strengthen actions around its cost base,
including further flexing staffing levels, lowering discretionary
spend, and rephasing certain investments including opening fewer
stores than previously planned (now planning for a total of five
new stores in FY 23/24, versus seven previously). The business
continues to target up to 80 medium-box and compact store openings
over the next five years.
Iberia total sales decreased by 1.2% (LFL -1.2%) to GBP200m,
reflecting a resilient performance against good prior year
comparatives (H1 22/23 LFL +2.3%) and the impact of unseasonal
weather on seasonal category sales in Q2. Core and 'big-ticket'
sales were +0.2% for the half. The business achieved good YoY
growth in its building & joinery, EPHC and kitchen categories.
Retail profit decreased to GBP3m (H1 22/23: GBP6m, at reported
rates), reflecting lower sales and gross margin %, with slightly
higher operating costs, up 1.7% YoY.
Romania total sales decreased by 8.4% to GBP137m (LFL -4.9%),
reflecting strong prior year comparatives (H1 22/23 LFL +8.9%).
Sales trends improved in Q2 (LFL -2.7% vs Q1 -7.8%), largely driven
by an improvement in its core and 'big-ticket' category sales, with
positive LFL growth in EPHC and tools & hardware. Romania's
retail loss increased to GBP10m (H1 22/23: GBP4m reported retail
loss), primarily reflecting lower sales and gross margin %.
Operating costs increased by 1.0%, with cost inflation largely
offset by our strategic cost reduction initiatives including
reduced energy usage in stores.
In Turkey , Kingfisher's 50 % joint venture, Koçta , contributed
GBP5m of retail profit (H1 22/23: GBP4m, at reported rates). The
business opened 42 mostly compact stores in their financial
half-year to 30 June 2023, bringing its total store count to
397.
'Other' consists of the consolidated results of Screwfix
International, NeedHelp, and franchise agreements. Due to these
businesses being in their early investment phase, a combined retail
loss of GBP10m (H1 22/23: GBP13m reported retail loss) was
recorded, largely driven by Screwfix France as the business
invested in the opening of new stores. As noted in the UK &
Ireland commentary above, Screwfix has a total of nine stores in
operation in France as of 31 July 2023, having opened four in H1.
The business will also launch as a pure-play online retailer in
several European countries, later in Q3. Following extensive
testing and review, our two B&Q franchise stores in Saudi
Arabia will close by early 2024, and we will re-focus efforts on
wholesale and franchise agreements in other markets. We currently
have two wholesale agreements in place with the Al-Futtaim Group in
the Middle East, whereby certain OEB products are supplied to its
retailers.
RETAIL BANNER EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area(1)
(FTE) numbers (000s m(2) )
at 31 July 2023 at 31 July 2023 at 31 July 2023
B&Q 16,147 309 2,201
Screwfix 9,738 884 55
----------------------- ------------------- ------------------- -------------------
UK & Ireland 25,885 1,193 2,256
Castorama 10,866 95 1,156
Brico Dépôt 8,286 124 875
----------------------- ------------------- ------------------- -------------------
France 19,152 219 2,031
Poland 11,896 98 825
Iberia 1,972 31 195
Romania 2,420 33 238
Other(2) 178 9 -
Other International 16,466 171 1,258
----------------------- ------------------- ------------------- -------------------
Total 61,503 1,583 5,545
----------------------- ------------------- ------------------- -------------------
(1) Screwfix sales area relates to the front of counter area of
an outlet.
(2) 'Other' consists of Screwfix International, NeedHelp, and
franchising.
Section 4: FY 2023/24 Technical guidance
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
- Sales impact of c.+ 1.5 % from net space growth, largely from Screwfix and Castorama Poland
-- New businesses
- 'Other' retail losses of c.GBP 30 m (FY 22/23: GBP 30 m)
(previous guidance: c.GBP40m; lower guidance driven by rephasing of
investments in Screwfix France) . 'Other' consists of the
consolidated results of Screwfix International, NeedHelp, and
franchise agreements, recorded within the 'Other International'
division
-- Central costs
- Anticipate c.GBP 65 m (FY 22/23: GBP 49 m; FY 21/22: GBP60m) (previous guidance: c.GBP 60m)
-- Net finance costs
- Decrease by c.GBP10m due to higher interest income (FY 22/23:
GBP 112 m) (previous guidance: decrease by c.GBP 5m)
-- Adjusted PBT
- Full year adjusted PBT of c.GBP590m(1) (previous guidance:
comfortable with consensus of sell-side analyst estimates for FY
23/24 adjusted PBT of GBP634m, as of 24 April 2023)
-- Tax rate
- Group adjusted effective tax rate* of c. 26 % (FY 22/23: 22 %)
(previous guidance: c.25%; higher guidance driven by changes in our
expectations for the blend of profit this year within the Group's
various jurisdictions)
Cash flow
-- Capital expenditure
- Targeting gross capex of c.GBP425m (FY 22/23: GBP449m; c.3.4%
of total sales) (previous guidance: broadly flat YoY )
-- Free cash flow
- >GBP500m for the year, supported by the unwind of working
capital outflows from the prior year
-- Share buybacks
- c.GBP109m outflow related to previous share buyback programme;
expect new GBP300m share buyback programme (announced today) to
commence in early October
-- Dividends
- c.GBP235m outflow for dividends related to the FY 22/23 final
dividend and FY 23/24 interim dividend. Our dividend policy target
cover range remains 2.25 to 2.75 times, based on adjusted basic
earnings per share. We may move outside of this target range,
temporarily, from time to time
(1) Guidance assumes current exchange rates.
Section 5: H1 2023/24 Financial review
A summary of the reported financial results for the six months
ended 31 July 2023 is set out below.
Financial summary % Total % Total % LFL
Change Change Change
--------- ---------- ----------
Constant Constant
2023/24 2022/23 Reported currency currency
------------------------- ------------ ------------ --------- ---------- ----------
Sales GBP6,880m GBP6,809m +1.1% (1.0)% (2.2)%
Gross profit GBP2,495m GBP2,496m (0.1)% (2.0)%
Gross margin % 36.3% 36.7% (40)bps (40)bps
Operating profit GBP367m GBP531m (30.9)%
Statutory pre-tax profit
(PBT) GBP317m GBP474m (33.1)%
Statutory post-tax
profit GBP237m GBP373m (36.5)%
Statutory basic EPS 12.4p 18.6p (33.4)%
Net increase/(decrease) GBP51m GBP(329)m n/a
in cash(1)
Interim dividend 3.80p 3.80p -
Adjusted metrics
Retail profit GBP433m GBP555m (22.0)% (23.0)%
Retail profit margin
% 6.3% 8.2% (190)bps (180)bps
Adjusted pre-tax profit
(PBT) GBP336m GBP472m (28.8)%
Adjusted pre-tax profit
margin %* 4.9% 6.9% (200)bps
Adjusted post-tax profit GBP249m GBP368m (32.3)%
Adjusted basic EPS 13.0p 18.3p (28.9)%
Free cash flow GBP346m GBP104m n/a
Net debt(2) GBP(2,181)m GBP(1,848)m n/a
(1) Net increase/(decrease) in cash and cash equivalents and
bank overdrafts.
(2) Net debt includes GBP2,398m of lease liabilities under IFRS
16 in H1 23/24 (H1 22/23: GBP2,318m).
Total sales decreased by 1.0% on a constant currency basis, to
GBP6,880m, reflecting resilience across both retail and trade
channels, particularly in the UK & Ireland. Sales were higher
in the UK & Ireland, offset by lower sales in Poland, where we
faced strong comparatives and an increasingly weaker trading
environment, and France where consumer confidence is at a 10-year
low (as measured by the National Institute for Statistics and
Economics in France (INSEE)). Sales were also lower in Iberia and
Romania, where we faced tough comparatives. On a reported basis,
which includes the impact of exchange rates, total sales increased
by 1.1%.
LFL sales of -2.2% excludes a +1.2% sales impact from a net
increase in space, driven by Screwfix store openings in the UK
& Ireland and Castorama in Poland, and the acquisition of
assets of Connect Distribution Services Limited (renamed Screwfix
Spares). During H1, we opened 19 new stores (including 11 stores in
the UK, two in Ireland, five in France including four Screwfix
stores, and one in Poland), and closed eight 'grocery concession'
stores in the UK.
Gross margin % decreased by 40 basis points on a constant
currency basis, reflecting higher customer participation in
promotional activity in France and Poland, higher clearance costs
and stock provisions, and sales mix in Poland. On a reported basis,
gross margin % also decreased by 40 basis points. Group gross
profit decreased by 2.0% in constant currency.
In constant currency, retail profit decreased by 23.0 %, largely
reflecting lower gross profits in Poland and France , and higher
operating costs in the UK & Ireland and Poland. On a reported
basis, retail profit decreased by 22.0%. Operating costs increased
by 4.0% on a constant currency basis, largely reflecting cost
inflation, including YoY increases in pay rates and energy costs,
higher technology spend, higher costs associated with space growth
and new store openings, and charges related to ineffective foreign
exchange hedges. The increase in operating costs was partially
offset through flexing our staffing levels and variable costs, and
reductions achieved by our strategic cost reduction programme. The
Group's retail profit margin % decreased by 180 basis points on a
constant currency basis to 6.3% (H1 22/23: 8.2%, at reported
rates).
Adjusted pre-tax profit decreased by 28.8% to GBP336m (H1 22/23:
GBP472m), reflecting lower retail profit, higher central costs
(including the impact of insurance claim deductibles in the UK
& Ireland and Poland) and higher share of JV interest and tax
(reflecting accounting under high inflation and interest rates in
our joint venture Koçta ), partially offset by lower net finance
costs. Adjusted pre-tax profit margin % decreased by 200 basis
points to 4.9% (H1 22/23: 6.9%).
Statutory pre-tax profit , which includes adjusting items,
decreased by 33.1% to GBP317m (H1 22/23: GBP474m). This reflects
lower operating profit, including the impacts of impairments (see
adjusting items below).
A reconciliation from the adjusted basis to the statutory basis
for pre-tax profit is set out below:
2023/24 2022/23 Increase/ (decrease)
GBPm GBPm
---------------------------------------------------------- -------- -------- ---------------------
Retail profit (constant currency) 433 562 (23.0)%
Impact of exchange rates - (7) n/a
---------------------------------------------------------- -------- -------- ---------------------
Retail profit (reported) 433 555 (22.0)%
Central costs (36) (26) n/a
Share of interest and tax of joint ventures & associates (11) - n/a
Net finance costs (50) (57) n/a
---------------------------------------------------------- -------- -------- ---------------------
Adjusted pre-tax profit 336 472 (28.8)%
Adjusting items before tax (19) 2 n/a
Statutory pre-tax profit 317 474 (33.1)%
---------------------------------------------------------- -------- -------- ---------------------
Net finance costs of GBP50m (H1 22/23: GBP57m) consist
principally of interest on IFRS 16 lease liabilities. The YoY
decrease was largely due to higher interest income.
Adjusting items after tax were a total charge of GBP12m (H1
22/23: gain of GBP5m), as detailed below:
2023/24 2022/23
GBPm GBPm
Gain/(charge) Gain/(charge)
------------------------------------------------------ --------------- ---------------
Net store asset impairment charges (14) -
Operating model restructuring (7) -
Release of France and other restructuring provisions - 1
Profit on disposal of Crealfi associate investment 2 -
Profit on exit of properties - 1
Adjusting items before tax (19) 2
Prior year and other adjusting tax items 7 3
Adjusting items after tax (12) 5
------------------------------------------------------ --------------- ---------------
In consideration of H1 23/24 performance to date, we have
revised future projections for a number of stores across the
Group's portfolio. This has resulted in the recognition of GBP14m
of net store impairments in the period. These have been recorded
principally in France, Poland and Romania.
During the period, the Group commenced formal consultations with
employee representatives regarding a proposed restructuring of the
Group technology operating model. Charges of GBP7m have been
recorded in the period, primarily related to this programme. The
total cost of the programme is expected to reach c.GBP15m by FY
24/25.
On 30 June 2023, the Group completed the disposal of its 49%
interest in its French associate investment Crealfi S.A., resulting
in a gain on disposal of GBP2m.
Prior year and other adjusting tax items relate principally to
deferred tax credits recorded in respect of the impairment and
restructuring expenses noted above, movements in prior year
provisions to reflect a reassessment of expected outcomes, and
refunds from tax authorities. Please 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 26% (H1 22/23: 22%). The adjusted ETR is
higher than the prior year rate primarily due to the increase in
the UK statutory tax rate which took effect on 1 April 2023. Other
factors include the impact of a lower share of Group profit from
Poland, partially offset by reduced losses in territories in which
tax credits are not recognised.
The statutory effective tax rate includes the impact of
adjusting items (including prior year tax items). The impact of
these result in a statutory effective tax rate of 25%.
Pre-tax Pre-tax
profit profit
GBPm Tax 2023/24 GBPm Tax 2022/23
GBPm % GBPm %
------------------------- --------- -------- ---------- -------- ------- ---------
Adjusted effective tax
rate 336 (87) 26% 472 (104) 22%
Adjusting items (19) 7 2 3
------------------------- --------- -------- ---------- -------- ------- ---------
Statutory effective tax
rate 317 (80) 25% 474 (101) 21%
------------------------- --------- -------- ---------- -------- ------- ---------
In FY 21/22, Kingfisher paid GBP64m (including interest) to HM
Revenue & Customs in relation to the European Commission's 2019
state aid decision concerning the UK's controlled foreign company
tax rules. The General Court of the European Union dismissed
several of the appeals in June 2022 and the decision is now pending
with the European Court of Justice. The Group continues to
recognise the amounts paid, together with GBP3m of accrued
repayment interest, as a non-current tax asset, based on its
assessment that its appeal will ultimately be successful. Please
refer to note 17 of the condensed financial statements for further
details.
The statutory tax rates applicable to this financial year and
the expected statutory tax rates for next year in our main
jurisdictions are as follows:
Statutory tax rate Statutory tax rate
2024/25 2023/24
-------- ------------------- -------------------
UK 25% 24%
France 26% 26%
Poland 19% 19%
-------- ------------------- -------------------
Adjusted basic earnings per share decreased by 28.9% to 13.0p
(H1 22/23: 18.3p) , which excludes the impact of adjusting items.
Basic earnings per share decreased by 33.4% to 12.4p (H1 22/23:
18.6p) as set out below:
2023/24 2022/23
Earnings(1) EPS Earnings(1) EPS
GBPm pence GBPm pence
------------------------------------------ -------------- -------- -------------- --------
Adjusted basic earnings per share 249 13.0 368 18.3
Adjusting items before tax (19) (1.0) 2 0.1
Prior year and other adjusting tax items 7 0.4 3 0.2
Basic earnings per share 237 12.4 373 18.6
------------------------------------------ -------------- -------- -------------- --------
(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 22/23 interim dividend of 3.80 pence per
share. The interim dividend will be paid on 17 November 2023 to
shareholders on the register at close of business on 13 October
2023. 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 12 October
2023. The last date for receipt of DRIP elections is 27 October
2023. For further details on our dividend policy please refer to
'Medium-term financial and capital allocation priorities' within
Section 2.
Management of balance sheet and liquidity risk and financing
Management of cash and debt facilities
Kingfisher regularly reviews the level of cash and debt
facilities required to fund its activities. This involves preparing
a prudent cash flow forecast for the medium term, determining the
level of debt facilities required to fund the business, planning
for repayment of debt at its maturity, and identifying an
appropriate amount of headroom to provide a reserve against
unexpected outflows and/or unexpected impacts to cash inflows. To
retain financial flexibility, we aim to maintain strong liquidity
headroom (including cash and cash equivalents, and committed debt
facilities), which is currently set at a minimum of GBP800m.
Net debt to EBITDA
As of 31 July 2023, the Group had GBP2,181m (H1 22/23:
GBP1,848m) of net debt on its balance sheet including GBP2,398m (H1
22/23: GBP2,318m) of total lease liabilities.
The ratio of the Group's net debt to EBITDA (on a last twelve
months' basis) was 1.6 times as of 31 July 2023 (1.6 times as of 31
January 2023) . At this level, the Group has financial flexibility
whilst retaining an efficient cost of capital.
T he Group's maximum net debt to EBITDA is 2.0 times over the
medium term. For further details please refer to 'Medium-term
financial and capital allocation priorities' within Section 2.
Net debt to EBITDA is set out below:
2023/24 2022/23
Moving annual total Year end
GBPm GBPm
Retail profit 801 923
Central costs (59) (49)
Depreciation and amortisation 615 582
EBITDA 1,357 1,456
Net debt 2,181 2,274
------------------------------- --------------------- ----------
Net debt to EBITDA 1.6 1.6
------------------------------- --------------------- ----------
Credit ratings
Kingfisher holds a BBB credit rating with Fitch, (P) Baa2 rating
with Moody's, and a BBB rating with Standard and Poor's. The
Outlook is Stable across all three agencies.
Revolving credit facility
The Group has a GBP550m revolving credit facility (RCF)
agreement in place with a group of its relationship banks, linked
to sustainability and community-based targets, of which c.GBP50m
expires in May 2025 and c.GBP500m expires in May 2026. As of 31
July 2023, this RCF was undrawn.
Term loans
In FY 22/23, the Group entered into two new fixed term loans:
GBP50m maturing in December 2024 and GBP50m maturing in January
2025, with the latter linked to the Group's sustainability and
community-based targets.
Covenants
The terms of the committed RCF and both term loans require that
the ratio of Group operating profit (excluding adjusting items) to
net interest payable (excluding interest on IFRS 16 lease
liabilities) must be no less than 3:1 for the preceding 12 months
as at the half and full year-ends. As of 31 July 2023, Kingfisher
was in compliance with this requirement.
Total liquidity
As of 31 July 2023, the Group had access to over GBP800m in
total liquidity, including cash and cash equivalents of GBP317m
(net of bank overdrafts) and access to a GBP550 m RCF. Further
detail on Kingfisher's debt and facilities can be found at
www.kingfisher.com .
Free cash flow
A reconciliation of free cash flow is set out below:
2023/24 2022/23
GBPm GBPm
Operating profit 367 531
Adjusting items 19 (2)
Operating profit (before adjusting items) 386 529
Other non-cash items(1) 341 295
Change in working capital 84 (223)
Pensions and provisions - (13)
Net rent paid (238) (223)
---------------------------------------------------- -------- --------
Operating cash flow 573 365
Net interest received/(paid) 5 (2)
Tax paid (68) (75)
Gross capital expenditure (164) (184)
Free cash flow 346 104
Ordinary dividends paid (165) (172)
Share buybacks (99) (218)
Share purchase for employee incentive schemes (24) (9)
French tax authority payment - (34)
Disposal of Crealfi S.A. and acquisition of assets 6 -
of Connect Distribution Services Limited
Disposal of assets and other(2) (13) -
Net cash flow* 51 (329)
Opening net debt (2,274) (1,572)
Movements in lease liabilities 40 57
Other movement including foreign exchange 2 (4)
---------------------------------------------------- -------- --------
Closing net debt (2,181) (1,848)
---------------------------------------------------- -------- --------
(1) Includes principally depreciation and amortisation,
share-based compensation charge and pension operating cost.
(2) Includes adjusting cash flow items (principally comprising
restructuring costs), partially offset by proceeds from the issue
of new shares, dividends from joint ventures and associates, and
disposal of assets.
Operating profit (before adjusting items) was GBP143m lower than
last year, reflecting lower retail profit, higher central costs and
higher share of JV interest and tax. The working capital inflow of
GBP 84 m was driven by an increase in payables of GBP226m,
reflecting more normalised purchasing patterns compared to prior
periods (during which we made higher inventory purchases to rebuild
product availability, build seasonal and 'buffer' stock, and secure
lower cost stock). Net inventory increased by GBP89m, largely
reflecting the seasonality of stock levels at half year versus year
end. The sell-through of 'carry-over' seasonal stock in H1 was
limited to an extent by lower than expected seasonal sales in the
period. Receivables increased by GBP 53 m.
Gross capital expenditure in H1 was GBP164m, decreasing by 11%
YoY (H1 22/23: GBP184m). Of this expenditure, 27% was invested in
refreshing, maintaining and adapting existing stores (including
renewable energy initiatives), 13% on new stores, 32% on technology
and digital development, 6% on range reviews and 22% on other areas
including supply chain investment.
Overall, free cash flow for H1 was GBP346m (H1 22/23: GBP104m).
Net debt (including IFRS 16 lease liabilities) as of 31 July 2023
was GBP2,181m (H1 22/23: GBP1,848m).
A reconciliation of free cash flow and net cash flow to the
statutory net movement in cash and cash equivalents and bank
overdrafts is set out below:
2023/24 2022/23
GBPm GBPm
------------------------------------------------------ -------- --------
Free cash flow 346 104
Ordinary dividends paid (165) (172)
Share buybacks (99) (218)
Share purchase for employee incentive schemes (24) (9)
French tax authority payment - (34)
Disposal of Crealfi S.A. and acquisition of assets 6 -
of Connect Distribution Services Limited
Disposal of assets and other(1) (13) -
------------------------------------------------------ -------- --------
Net cash flow 51 (329)
Net increase/(decrease) in cash and cash equivalents
and bank overdrafts 51 (329)
------------------------------------------------------ -------- --------
(1) Includes adjusting cash flow items (principally comprising
restructuring costs), partially offset by proceeds from the issue
of new shares, dividends from joint ventures and associates, and
disposal of assets.
Pensions
As of 31 July 2023, the Group had a net surplus of GBP127m (H1
22/23: GBP406m net surplus, FY 22/23: GBP137m net surplus) in
relation to defined benefit pension arrangements, of which a
GBP243m surplus (GBP251m surplus as of 31 January 2023) 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. As part of the funding
valuation exercise completed in the prior year, the Trustee and
Kingfisher agreed to cease annual employer contributions from
August 2022 to July 2025. The accounting valuation is sensitive to
a number of assumptions and market rates which are likely to
fluctuate in the future. Please refer to note 11 of the condensed
financial statements for further details.
Risks
The Group's principal risks and uncertainties have been reviewed
as part of our half year procedures. There are no additions since
the FY 22/23 year-end. The risk of 'contagious diseases' has been
removed as a principal risk, as we no longer see this as a material
risk to the Group. We have successfully demonstrated our ability to
operate in challenging circumstances, and we are better prepared to
react should a new epidemic or pandemic occur. We will continue to
monitor any remaining operational challenges through the existing
'supply chain resilience' risk.
The current macroeconomic climate remains uncertain, and
inflation levels remain high across all our territories despite
recent reductions. These factors continue to put pressure on
consumer confidence and pose challenges for the wider retail
industry. We continue to carefully monitor and manage the external
situation to ensure our costs are well controlled and that we
provide value for money to our customers.
-- Our people: Our colleagues are critical to the successful
delivery of our 'Powered by Kingfisher' strategy. Failure to
retain, develop and attract colleagues with appropriate skills
could impact our ability to deliver our strategic priorities at the
pace required. This risk is particularly important for our
technology and digital functions. Furthermore, we have set
ambitious inclusion and diversity targets, aimed at making
Kingfisher an even better place to work whilst increasing our
innovation and creativity. Failure to meet these could have a
negative impact on delivering our business objectives.
-- Level and impact of change: We continue to execute our
strategy at pace and invest for growth. 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 technologies.
In particular, we are evolving our technology development programme
to better meet banner and customer needs. 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.
-- 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 and to be financially resilient, particularly to
fluctuations in energy prices. Major disruption to our supply chain
could result in reduced levels of product availability, with an
adverse financial and reputational impact.
-- Competitor behaviour: Our competitors include both
store-based and pure-play online retailers. In recent years, we
have seen an increase in online penetration in the home improvement
market, including through e-commerce marketplaces. Competitors are
also developing their offers, including more products, services and
fulfilment options. Targeted actions or disruptive behaviour by
competitors could negatively impact our market share, the value of
our assets and our financial results.
-- Responding to 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 are
investing in innovative digital channels supported by an agile and
reliable infrastructure, a robust logistics capability and an
optimised property portfolio with in-store services. Failure to
identify and respond to new trends effectively with pace could
affect our ability to stimulate spend and adversely impact the
value of our assets and our financial results.
-- Geopolitical instability creating macroeconomic 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 and protests, work stoppages
and/or our ability to receive products from affected countries.
These impacts could potentially disrupt the day-to-day operations
of our business. Recent geopolitical events have created
uncertainty in economic markets, with higher energy prices fuelling
inflation. This uncertainty and volatility could change customer
behaviours and reduce consumer confidence, and negatively impact
the demand for our products and services. Furthermore, if
governments try to reduce their budget deficits through further
taxation, this could create additional burdens on consumers and
businesses.
-- Cyber and data security: Cyber-attacks and security incidents
continue to present a risk for organisations. We proactively manage
our risk profile and will continue to do so as we deliver on our
strategy, and as our use of technology evolves. Failure to protect
data, detect breaches, and respond accordingly could negatively
impact our operations, profitability and reputation.
-- Legal and regulatory: The Group's operations are subject to a
broad range of regulatory requirements in the markets in which we
operate. A major corporate issue or crisis, a significant fraud, or
material non-compliance with legislative or regulatory requirements
could impact our brands and reputation, potentially exposing us to
significant fines or penalties and requiring significant management
attention.
-- Reputation and trust: Our customers, colleagues, suppliers,
investors and the communities we source from and operate in 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 how we help our customers to reduce the impact on
the environment of their homes, responsible sourcing and diversity
(please refer to 'Lead the industry in Responsible Business and
energy efficiency' within Section 2 for further details). Failure
to deliver on our obligations and commitments, or material breaches
of our policies or controls, could undermine trust in Kingfisher,
damage our reputation and impact our ability to meet our strategic
objectives.
-- Climate change: Climate change could have significantly
adverse consequences on society and businesses without concerted
mitigation efforts. We have identified several climate-related
financial and operational risks, which are potentially significant
if climate solutions are not effective, even if their impact over
our outlook period is limited. These include:
- The cost of carbon increasing, through the introduction and
strengthening of national and international carbon policies and
pricing mechanisms.
- Physical damage to assets and business disruption from an
expected increase in the frequency of extreme weather events.
- Sourcing and supply chain disruption, and changes in the
availability of key raw materials (such as timber) from long-term
climate changes.
Failure to implement appropriate cross-functional responses to
these risks could negatively impact our operations and
profitability over time. In response to these challenges, we have
created ambitious carbon reduction plans. Failure to deliver on
these could damage our reputation.
Further details of the Group risks and risk management process
can be found on pages 51 to 58 of the 2022/23 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.
Closest
equivalent Reconciling items
APM IFRS measure to IFRS measure Definition and purpose
Adjusted Basic earnings A reconciliation Adjusted basic earnings per share
basic earnings per share of adjusted basic represents profit after tax attributable
per share earnings per share to the owners of the parent, before
(EPS) is included in the impact of adjusting items (see
the Financial definition below), divided by the
Review (Section weighted average number of shares
5) and note 8 in issue during the period. The
of the condensed exclusion of adjusting items helps
financial statements provide an indication of the Group's
ongoing business performance.
--------------- ----------------------- ------------------------------------------------
Adjusted Effective A reconciliation The adjusted effective tax rate
effective tax rate to the statutory is calculated as continuing income
tax rate effective tax tax expense excluding tax adjustments
rate is set out in respect of prior years (including
in the Financial the impact of changes in tax rates
Review (Section on deferred tax), significant one-off
5) tax settlements and provision charges/releases
and the tax effects of adjusting
items, divided by continuing profit
before taxation excluding adjusting
items. Prior year tax items represent
income statement tax relating to
underlying items originally arising
in prior years, including the impact
of changes in tax rates on deferred
tax. The exclusion of items relating
to prior years, and those not in
the ordinary course of business,
helps provide an indication of
the Group's ongoing rate of tax.
--------------- ----------------------- ------------------------------------------------
Adjusted Profit A reconciliation Adjusted pre-tax profit is used
pre-tax profit before of adjusted pre-tax to report the performance of the
taxation profit is set business at a Group level. This
out in the Financial is stated before adjusting items.
Review (Section The exclusion of adjusting items
5) helps provide an indication of
the Group's ongoing business performance.
--------------- ----------------------- ------------------------------------------------
Adjusted No direct Refer to definition Adjusted pre-tax profit is used
pre-tax profit equivalent to report the performance of the
margin % 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 Profit A reconciliation Adjusted post-tax profit is used
post-tax after tax of adjusted post-tax to report the after-tax performance
profit profit is set of the business at a Group level.
out in the Financial This is stated before adjusting
Review (Section items. The exclusion of adjusting
5) and note 8 items helps provide an indication
of the condensed of the Group's ongoing after-tax
financial statements business performance.
--------------- ----------------------- ------------------------------------------------
Adjusting No direct Not applicable Adjusting items, which are presented
items equivalent 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 Not applicable Central costs principally comprise
equivalent 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 No direct Not applicable Constant currency changes in total
currency equivalent sales, LFL sales, gross profit,
gross margin %, retail profit,
retail profit margin % and operating
costs reflect the year-on-year
movements after translating the
prior year comparatives at the
current year's average exchange
rates. These are presented to eliminate
the effects of exchange rate fluctuations
on the reported results.
--------------- ----------------------- ------------------------------------------------
Core and No direct Not applicable Core and 'big-ticket' category
'big-ticket' equivalent sales include the sales from non-seasonal
category products across all our categories,
sales (+/-) including 'big ticket' sales (i.e.,
kitchen, bathroom & storage). It
is used as a measure of our non-seasonal
related performance, which is the
majority of Group sales.
--------------- ----------------------- ------------------------------------------------
Dividend No direct Not applicable Dividend cover represents the ratio
cover equivalent 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 No direct Refer to definition Digitally-enabled sales are e-commerce
sales equivalent 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 No direct Refer to definition E-commerce sales penetration %
sales penetration equivalent represent total e-commerce sales
% as a percentage of sales. For the
purpose of this calculation only,
sales are adjusted to replace marketplace
net sales with marketplace gross
sales. It is used to track the
success of our e-commerce strategy.
--------------- ----------------------- ------------------------------------------------
First-party No direct Refer to definition First-party e-commerce sales are
e-commerce equivalent total first-party sales (excluding
sales 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 No direct Refer to definition Total e-commerce sales are first-party
e-commerce equivalent e-commerce sales plus marketplace
sales gross sales. References to digital
or e-commerce sales growth relates
to growth in constant currency.
It is used to measure the performance
of all e-commerce business (first-party
and third-party) across the Group.
--------------- ----------------------- ------------------------------------------------
EBITDA Profit A reconciliation EBITDA (earnings before interest,
before of EBITDA is set tax, depreciation and amortisation)
taxation out in the Financial is calculated as retail profit
Review (Section less central costs and before depreciation
5) and amortisation. This measure
is widely used in calculating the
ratio of net debt to EBITDA, and
is used to reflect the Group's
leverage.
--------------- ----------------------- ------------------------------------------------
Free cash Net increase A reconciliation Free cash flow represents the cash
flow in cash of free cash flow generated from operations (excluding
and cash is set out in adjusting items) less the amount
equivalents the Financial spent on interest, tax and capital
and bank Review (Section expenditure during the year (excluding
overdrafts 5) 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 Refer to definition Gross profit represents sales from
% equivalent the supply of home improvement
products and services (excluding
VAT), less the associated cost
of those sales. Gross margin %
represents gross profit as a percentage
of sales. It is a measure of operating
performance.
--------------- ----------------------- ------------------------------------------------
LFL Sales Refer to definition LFL (like-for-like) sales growth
represents the constant currency,
year-on-year sales growth for stores
that have been open for more than
one year. It is a measure to reflect
the Group's performance on a comparable
basis.
--------------- ----------------------- ------------------------------------------------
Marketplace No direct Refer to definition Marketplace GMV is the total transaction
gross merchandise equivalent value (including VAT) from the
value (GMV) 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 No direct Refer to definition Marketplace gross sales is the
gross sales equivalent 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 No direct Refer to definition Marketplace net sales are commissions
net sales equivalent (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 No direct Refer to definition Marketplace participation % represents
participation equivalent marketplace gross sales as a percentage
% of total e-commerce sales. It is
used to track the success of our
marketplace strategy and performance.
--------------- ----------------------- ------------------------------------------------
Net debt No direct A reconciliation Net debt comprises lease liabilities,
equivalent of this measure borrowings and financing derivatives
is provided in (excluding accrued interest), less
note 16 of the cash and cash equivalents and short-term
condensed financial deposits, including such balances
statements classified as held for sale.
--------------- ----------------------- ------------------------------------------------
Net cash Net increase A reconciliation Net cash flow is a measure to reflect
flow in cash of net cash flow the total movement in the net debt
and cash is set out in balance during the year excluding
equivalents the Financial the movement in lease liabilities,
and bank Review (Section exchange differences and other
overdrafts 5) and in note non-cash movements.
16 of the condensed
financial statements
--------------- ----------------------- ------------------------------------------------
Operating No direct Not applicable Operating costs represent gross
costs equivalent profit less retail profit. This
is the Group's operating cost measure
used to report the performance
of our retail businesses.
--------------- ----------------------- ------------------------------------------------
Own exclusive No direct Refer to definition OEB refers to our portfolio of
brands (OEB) equivalent own exclusive brands across seven
sales core categories - surfaces & décor,
tools & hardware, bathroom & storage,
kitchen, EPHC (electricals, plumbing,
heating & cooling), building &
joinery, and outdoor.
OEB sales are sales of own exclusive
brand products. It is used to measure
the performance of OEB across the
Group.
--------------- ----------------------- ------------------------------------------------
Retail profit Profit A reconciliation Retail profit is stated before
before of Group retail central costs, adjusting items
taxation profit to profit and the Group's share of interest
before taxation and tax of JVs and associates.
is set out in This is the Group's operating profit
the Financial measure used to report the performance
Review (Section of our retail businesses.
5) and note 4
of the condensed
financial statements.
There is no statutory
equivalent to
retail profit
at a retail banner
level
--------------- ----------------------- ------------------------------------------------
Retail profit No direct Refer to definition Retail profit is the Group's operating
margin % equivalent 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.
--------------- ----------------------- ------------------------------------------------
Same-store Inventory Refer to definition Same-store net inventory movement
net inventory represents the constant currency,
year-on-year change in net inventory
before the impact of store openings
and closures. It is a measure to
reflect the Group's inventory management
on a comparable basis.
--------------- ----------------------- ------------------------------------------------
Seasonal No direct Refer to definition Seasonal category sales include
category equivalent the sales from certain products
sales (+/-) within our outdoor, electricals,
plumbing, heating & cooling (EPHC)
and surfaces & décor categories.
It is used as a measure of the
performance of our sales that are
subject to the season we are in,
or prevailing weather conditions.
--------------- ----------------------- ------------------------------------------------
(+/-) Indicates the inclusion of new APMs during H1 23/24. The
new APMs in the table above have been introduced to track the
performance of our core and 'big-ticket' and seasonal category
sales.
Other Definitions
Banque de France data for DIY retail sales (non-seasonally
adjusted). Includes relocated and extended stores.
https://webstat.banque-france.fr/fr/#/node/5384398 . As of and
including January 2023, we have taken the decision to no longer
communicate Castorama France and Brico Dépôt France monthly sales
figures to Banque de France and the internal index of FMB
(Fédération des Magasins de Bricolage - our trade association),
until further notice.
'Do It Yourself' (DIY) sales include products that facilitate
self-undertaken home improvement projects and tasks, including
paint, lighting, tools and hardware, and garden maintenance.
'Do It For Me' (DIFM) sales include products and services used
in home improvement projects and tasks that predominantly require a
tradesperson to undertake, including kitchens, bathrooms, tiling,
wardrobes, windows and doors, certain electrical and plumbing
activities, and installation services.
France consists of Castorama France and Brico Dépôt France.
GNFR (Goods Not For Resale) covers the procurement of all goods
and services a retailer consumes (including ocean freight, energy,
media buying, cleaning, and security).
Iberia consists of Brico Dépôt Spain and Brico Dépôt
Portugal.
Other International consists of Poland, Iberia, Romania,
'Other', and Turkey (Koçta JV). 'Other' consists of the
consolidated results of Screwfix International, NeedHelp, and
results from franchise agreements.
SKU (Stock Keeping Unit) is defined as the number of individual
variants of products sold or remaining in stock. It is a distinct
type of item for sale, such as a product and all attributes
associated with the item type that distinguish it from others.
These attributes could include, but are not limited to,
manufacturer, description, material, size, colour, packaging and
warranty terms.
UK & Ireland consists of B&Q in the UK & Ireland and
Screwfix in the UK & Ireland.
Section 7: Forward-looking statements
You are not to construe the content of this announcement as
investment, legal or tax advice and you should make your own
evaluation of the Company and the market. If you are in any doubt
about the contents of this announcement or the action you should
take, you should consult a person authorised under the Financial
Services and Markets Act 2000 (as amended) (or if you are a person
outside the UK, otherwise duly qualified in your jurisdiction).
This announcement has been prepared in relation to the financial
results for the six months ended 31 July 2023. The financial
information referenced in this announcement is not audited and does
not contain sufficient detail to allow a full understanding of the
results of the Group. Nothing in this announcement should be
construed as either an offer or invitation to sell or any offering
of securities or any invitation or inducement to any person to
underwrite, subscribe for or otherwise acquire securities in any
company within the Group or an invitation or inducement to engage
in investment activity under section 21 of the Financial Services
and Markets Act 2000 (as amended) (or, otherwise under any other
law, regulation or exchange rules in any other applicable
jurisdiction).
Certain information contained in this announcement may
constitute "forward-looking statements" (including within the
meaning of the safe harbour provisions of the United States Private
Securities Litigation Reform Act of 1995), which can be identified
by the use of terms such as "may", "will", "would", "could",
"should", "expect", "anticipate", "project", "estimate", "intend",
"continue", "target", "plan", "goal", "aim", forecast, or "believe"
(or the negatives thereof) or other variations thereon or
comparable terminology. These forward-looking statements are based
on currently available information and our current assumptions,
expectations and projections about future events. These
forward-looking statements include all matters that are not
historical facts and include statements which look forward in time
or statements regarding the Company's intentions, beliefs or
current expectations and those of our Officers, Directors and
employees concerning, amongst other things, the Company's results
of operations, financial condition, changes in global or regional
trade conditions (including a downturn in the retail or financial
services industries), competitive influences, changes in tax rates,
exchange rates or interest rates, changes to customer preferences,
the state of the housing and home improvement markets, share
repurchases and dividends, capital expenditure and capital
allocation, liquidity, prospects, growth and strategies, litigation
or other proceedings to which we are subject, acts of war or
terrorism worldwide, work stoppages, slowdowns or strikes, public
health crises, outbreaks of contagious disease, environmental
disruption or political volatility. By their nature,
forward-looking statements are not guarantees of future performance
and are subject to future events, risks and uncertainties - many of
which are beyond our control, dependent on actions of third
parties, or currently unknown to us - as well as potentially
inaccurate assumptions that could cause actual events or results or
actual performance of the Group to differ materially from those
reflected or contemplated in such forward-looking statements. For
further information regarding risks to Kingfisher's business,
please consult the risk management section of the Company's Annual
Report (as published). No representation, warranty or other
assurance is made as to the achievement or reasonableness of, and
no reliance should be placed on, such forward-looking
statements.
The forward-looking statements contained in this announcement
speak only as of the date of this announcement and the Company does
not undertake any obligation to update or revise any
forward-looking statement to reflect any new information, change in
circumstances, or change in the Company's expectations to reflect
events or circumstances after the date of this announcement or to
reflect the occurrence of unanticipated events.
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END
IR BIGDCCSBDGXI
(END) Dow Jones Newswires
September 19, 2023 02:00 ET (06:00 GMT)
Kingfisher (LSE:KGF)
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Kingfisher (LSE:KGF)
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