TIDMKGF
RNS Number : 9281Z
Kingfisher PLC
20 September 2022
Half year results for the six months ended 31 July 2022
(unaudited)
Financial summary % Total % Total % LFL*
Change Change Change
--------- ----------- ----------
Constant Constant
2022/23 2021/22 Reported currency* currency
-------------------------- ------------ ---------- --------- ----------- ----------
Sales GBP6,809m GBP7,101m (4.1)% (2.8)% (4.1)%
Gross profit GBP2,496m GBP2,697m (7.4)% (6.3)%
Gross margin %* 36.7% 38.0% (130)bps (130)bps
Operating profit GBP531m GBP747m (29.1)%
Statutory pre-tax profit GBP474m GBP677m (30.0)%
Statutory post-tax profit GBP373m GBP556m (32.9)%
Statutory basic EPS 18.6p 26.4p (29.8)%
Net (decrease)/increase GBP(329)m GBP444m n/a
in cash(+/-)
Interim dividend 3.80p 3.80p -
Adjusted metrics
Retail profit* GBP555m GBP767m (27.7)% (27.1)%
Retail profit margin
%* 8.2% 10.8% (260)bps (270)bps
Adjusted pre-tax profit* GBP472m GBP669m (29.5)%
Adjusted post-tax profit* GBP368m GBP525m (29.7)%
Adjusted basic EPS* 18.3p 24.9p (26.6)%
Free cash flow* GBP104m GBP723m (85.6)%
Net debt*(1) GBP(1,848)m GBP(908)m n/a
* See page 4 for further details on non-GAAP measures and other
terms; (+/-) Net (decrease)/increase in cash and cash equivalents
and bank overdrafts
Highlights
-- H1 performance in line with expectations (total sales -2.8%
in constant currency and LFL -4.1%)
-- Sales significantly ahead of pre-pandemic levels (3-year LFL
sales +16.6%), supported by market share gains ; Group Q2 sales
trend ahead of Q1
-- Resilient sales from both DIY and DIFM/trade categories
-- Continued effective management of inflation and supply chain pressures
-- Strong execution against our strategic priorities and
investing for growth - digital, trade proposition, Screwfix and
Poland expansion
-- Attractive shareholder returns through dividends and ongoing
second GBP300m share buyback programme; reflects confidence in
long-term growth and cash generation opportunity
Thierry Garnier , Chief Executive Officer, said:
"Kingfisher has delivered a very resilient first half of sales.
While facing very strong comparatives from the prior year as well
as a more challenging environment, LFL sales were 16.6% ahead of
pre-pandemic levels with a sequential improvement from Q1 to Q2.
This was driven by the extension of share gains in all our key
markets, reflecting successful execution of our strategy, and
resilient sales from both DIY and trade customers. We are now back
to pre-pandemic levels for in-store product availability and
maintaining competitive pricing across our banners.
"Looking to the months ahead, although trading in the year to
date has been in line with our expectations, we remain vigilant
against the more uncertain economic outlook for the second half. We
are therefore focussed on delivering value to our customers at a
time when they need it most. You can expect continued strong
execution, with a focus on growing sales and market share,
effective management of our gross margin, and alignment of our
costs and inventories to market conditions.
"With the business and our balance sheet in a strong position,
we continue to invest in opportunities to drive growth. B&Q
successfully launched its first home improvement marketplace during
the period, and we are now preparing for marketplace launches in
France, Poland and Iberia. We are also continuing to invest in the
trade segment through Screwfix's expansion in the UK and Ireland,
as well as the further development of our offer for tradespeople
across our banners, building on the success of TradePoint. We are
on course to open our first Screwfix stores in France within a few
weeks from now . And we are developing innovative new products and
services to support more sustainable and energy efficient homes,
which will benefit our customers and the environment.
"These investments, together with the proven resilience of the
home improvement sector, our balanced exposure to DIY and
DIFM/trade, and our strong and consistent execution, support our
confidence in continuing to grow ahead of our markets."
H1 22/23 Group results
-- Sales down 2.8% in constant currency, reflecting strong prior
year comparatives linked to high demand for home improvement
products. Resilient sales across both retail and trade channels
-- LFL sales down 4.1% and corresponding 3-year LFL* up 16.6%
- Double-digit 3-year LFL sales growth across all banners (i.e., versus pre-pandemic levels)
- Positive 1-year growth in Poland, Iberia* and Romania;
resilient performance in France*; strong prior year comparatives
for the UK & Ireland*
-- Q2 22/23 LFL sales up 17.4% on a 3-year basis, adjusted for a
c.0.7% adverse calendar impact; stronger trend than Q1 22/23
(+14.8%, adjusted for a c.1.4% positive calendar impact)
-- Total e-commerce sales* down 19% (3-year growth up 156%); new
B&Q marketplace proposition performing well, and omni-channel
customer engagement scores remain high
- E-commerce sales penetration* of 16% (H1 21/22 and H1 19/20: 19% and 7%, respectively)
- B&Q marketplace gross sales* performing ahead of
expectations, representing 8% of B&Q's total e-commerce sales
in August 2022
-- Gross margin % down 130 basis points to 36.7% (H1 21/22:
38.0%; H1 19/20: 37.0%), reflecting an exceptionally strong prior
year comparative ( 'normalised' promotional activity versus the
prior year, one-off logistics spend to secure/manage seasonal and
'buffer' stock, and banner & category mix)
-- Retail profit down 27.1% in constant currency to GBP555m (H1
21/22: GBP767m; H1 19/20: GBP454m), largely reflecting very strong
prior year comparatives in the UK & Ireland
-- Statutory pre-tax profit down 30.0% to GBP474m (H1 21/22:
GBP677m; H1 19/20: GBP245m), reflecting lower operating profit,
partially offset by lower net finance costs
-- Adjusted pre-tax profit down 29.5% to GBP472m (H1 21/22:
GBP669m; H1 19/20: GBP337m), reflecting lower retail profit,
partially offset by lower net finance costs
-- Free cash flow of GBP104m, down 85.6% (H1 21/22: GBP723m; H1
19/20: GBP204m), largely reflecting working capital outflow
associated with completion of inventory rebuild programme
-- Net decrease in cash of GBP329m (H1 21/22: net increase in
cash of GBP444m), largely reflecting lower free cash flow, and
GBP390m of outflows in relation to ordinary dividends and share
buybacks
-- Net debt of GBP1,848m (GBP1,572m as of 31 January 2022),
reflecting the net decrease in cash
-- Net debt to last twelve months' EBITDA * of 1.3x (1.0x as of 31 January 2022)
-- Interim dividend per share declared of 3.80p (FY 21/22 interim dividend: 3.80p)
Outlook for FY 22/23
-- An encouraging start to trading in the second half of the year:
- Q3 22/23 LFL sales (to 17 September 2022)(2) up 15.2% on a
3-year basis, with 1-year LFL down 0.7%
- Continued resilience in outdoor and 'big-ticket' category sales trends
-- H1 performance and current trading in Q3 consistent with FY
22/23 adjusted pre-tax profit guidance of c.GBP770m, as set out at
the start of this year
-- For the balance of year, we have run several trading
scenarios to take into account the potential for a more uncertain
macroeconomic environment. These point towards a range of outcomes
for FY 22/23 adjusted pre-tax profit(3) of c.GBP730m to GBP770m
-- Expect continued strong execution:
- Targeting further market share growth
- Anticipate full year gross margin % to be in line with pre-pandemic level (FY 19/20: 37.0%)
- Accelerating investment in Screwfix France
- Committed to continued active and responsive management of our operating costs*
- Anticipate reduction of stock levels in H2 related to
sell-through of a large part of 'buffer' stock previously held to
protect product availability
Continuing to deliver against our strategic priorities
-- Strengthened competitive position in all key markets
-- High revenue retention rates of customers acquired during the pandemic
-- France: on track to complete 'fixes' in H2; LFL growth above
market and priority to deliver more profitable growth
-- Focused on investments to support long-term growth: Investing
in faster fulfilment and expanded product choice; targeting further
store expansion in Screwfix UK & Ireland and Castorama Poland;
opening first Screwfix stores in France within weeks; stepping up
initiatives to further increase trade penetration across the
Group
-- E-commerce:
- Expanded store-based picking model for faster click &
collect (C&C) and last-mile delivery, including optimised order
management through 'digital hub' stores, roll-out of C&C
lockers in Poland (also being tested at B&Q) and continued
successful roll-out of one-hour delivery with Screwfix Sprint
- New e-commerce marketplace model successfully launched at
B&Q (100,000 SKUs* added in six months); preparing roll-out of
marketplaces in France, Poland, Spain and Portugal
-- Own exclusive brands (OEB):
- OEB driving affordability, sustainability and wider customer engagement
- OEB represented 45% of Group sales in H1 (H1 21/22: 46%);
strong performance in kitchen, bathroom & storage and EPHC
(electricals, plumbing, heating & cooling) categories
- Developing specific OEB for different retail banners and
extending ranges to support choice - roll-out of 32 new and
redeveloped OEB brands almost complete
-- Mobile-led and service innovations:
- Embedding Scan & Go into the B&Q app
- Extending the roll-out of self-checkout terminals across B&Q, Castorama France and Poland
- Extended 3D design tool capabilities to new categories
(including bathrooms, modular storage solutions, fireplaces)
-- Compact stores and rightsizing:
- Continuing to test new compact stores and partnership models;
opened six new compact stores in H1 in the UK, France and Poland,
and first two B&Q franchise stores in the Middle East
- Positive initial results from the five stores rightsized in
the UK and France last year; preparing for further rightsizings in
H2 (in line with our previously announced target of up to 40
'big-box' store rightsizings across B&Q and Castorama France
over 10 years)
-- Trade proposition:
- A record 31 new store openings for Screwfix in the UK & Ireland in H1
- Screwfix online sales in France continue to perform well;
first distribution centre now operational, supporting opening of
first stores in France within a few weeks from now
- TradePoint (in B&Q) 3-year LFL sales growth of 34%,
outperforming core B&Q and Screwfix, and reaching 21% sales
penetration
- Launched plan to grow trade customer penetration across all
'big box' banners, including new trade loyalty programmes in Poland
and Iberia, and the introduction of new OEB and branded
trade-focused ranges
-- Costs and inventory:
- Multi-year cost reduction programmes partially mitigating against inflation pressures
- Majority of year on year (YoY) increase in net inventory
driven by inflation (61%) and store expansion (7%)
- Proactive inventory purchases from Q4 last year to (i) rebuild
product availability, (ii) build seasonal and 'buffer' stock ahead
of peak trading, and (iii) secure lower cost stock,
- Actions underway to further optimise sourcing footprint and
maximise Group sourcing efficiencies
- Good inventory health, with stock provisioning rates below pre-pandemic levels
-- Responsible Business:
- Announced new net-zero emissions target for our operations
(scope 1 and 2) by the end of 2040
- Innovative end-to-end solutions at B&Q and Brico Dépôt
France to help customers create a personalised energy efficiency
action plan for their homes, including access to relevant products
and services
- New targets for growth of sustainable home product sales
Footnotes
(1) Net debt includes c.GBP2.3bn lease liabilities under IFRS 16
in H1 22/23 (H1 21/22: c.GBP2.3bn).
(2) 'Q3 22/23 LFL sales (to 17 September 2022)' represents the
period from 31 July 2022 to 17 September 2022 compared against the
equivalent period in the prior year (i.e., 1 August 2021 to 18
September 2021). The corresponding 3-year LFL represents the period
31 July 2022 to 17 September 2022 compared against the equivalent
period in FY 19/20 (i.e., 4 August 2019 to 21 September 2019). The
figures are provisional and exclude certain non-cash accounting
adjustments relating to revenue recognition.
(3) Guidance assumes current exchange rates.
Non-GAAP measures and other terms
Throughout this release '*' indicates the first instance of a
term defined and explained in the Glossary (Section 6). Not all the
figures and ratios used are readily available from the unaudited
half year results included in part 2 of this announcement.
Management believes that these non-GAAP measures (or 'Alternative
Performance Measures'), including adjusted profit measures,
constant currency and like-for-like (LFL) sales growth, are useful
and necessary to assist the understanding of the Group's results.
Where required, a reconciliation to statutory amounts is set out in
the Financial Review (Section 5).
Contacts
Tel: Email:
Investor Relations +44 (0) 20 7644 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
This announcement can be downloaded from the Investors section
of our website at www.kingfisher.com .
Results presentation
We will host an in-person results presentation for
pre-registered analysts and investors today at 09.00 (UK time) at
the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.
A simultaneous live video webcast of the presentation and Q&A
will also be available via the Investors section of our website at
www.kingfisher.com, and subsequently available on demand. For
enquiries, please email investorenquiries@kingfisher.com .
Financial calendar ((+/-) Dates are provisional and may be
subject to change)
Q3 22/23 trading update 24 November 2022
Full year results 21 March 2023(+/-)
Q1 23/24 trading update 25 May 2023(+/-)
Half year results 19 September 2023(+/-)
Q3 23/24 trading update 22 November 2023(+/-)
American Depository Receipts
Kingfisher American Depository Receipts are traded in the US on
the OTCQX platform: (OTCQX: KGFHY)
http://www.otcmarkets.com/stock/KGFHY/quote .
The remainder of this release consists of seven main
sections:
1) H1 2022/23 Financial performance summary and current trading
2) Group update (including 'Powered by Kingfisher' strategic plan)
3) Trading review by division
4) FY 2022/23 Technical guidance
5) H1 2022/23 Financial review and, in part 2 of this
announcement, the condensed financial statements
6) Glossary
7) Forward-looking statements
Section 1: H1 2022/23 Financial performance summary and current
trading
Income statement summary
GBPm % Total % Total % LFL
Change Change Change
-------- -------- -------- --------- ----------
Constant Constant
2022/23 2021/22 Reported currency currency
---------------------------- -------- -------- -------- --------- ----------
Sales 6,809 7,101 (4.1)% (2.8)% (4.1)%
Gross profit 2,496 2,697 (7.4)% (6.3)%
Retail profit:
UK & Ireland 339 579 (41.3)% (41.3)%
France 129 129 +0.3% +2.4%
----------------------------- -------- -------- -------- ---------
Poland 94 58 +58.6% +66.4%
Iberia 6 11 (41.9)% (40.7)%
Romania (1) (4) (6) +25.3% +23.3%
Other (+/-) (13) (5) n/a n/a
Turkey (50% joint venture) 4 1 n/a n/a
----------------------------- -------- -------- -------- ---------
Other International* 87 59 +43.7% +52.1%
----------------------------- -------- -------- -------- ---------
Retail profit 555 767 (27.7)% (27.1)%
Central costs* (26) (27) (2.0)%
Share of JV interest - (1) n/a
and tax
Operating profit
(before adjusting
items*) 529 739 (28.5)%
----------------------------- -------- -------- --------
Net finance costs (57) (70) (18.6)%
Adjusted pre-tax profit 472 669 (29.5)%
----------------------------- -------- -------- --------
Adjusting items 2 8 n/a
Statutory pre-tax
profit 474 677 (30.0)%
----------------------------- -------- -------- --------
(+/-) 'Other' consists of the consolidated results of NeedHelp
(acquired in November 2020), Screwfix International (launched
online in France in April 2021), and results from franchise
agreements.
LFL sales by quarter
Quarterly sales % LFL Change
---------------------------------
Q1 22/23 Q2 22/23 H1 22/23
UK & Ireland (15.8)% (7.1)% (11.6)%
- B&Q (18.3)% (7.4)% (13.0)%
- Screwfix (10.9)% (6.4)% (8.8)%
France (3.7)% (2.3)% (3.0)%
- Castorama - (1.0)% (0.5)%
- Brico Dépôt (7.5)% (3.7)% (5.5)%
Other International +37.1% +8.1% +19.5%
- Poland +54.5% +8.9% +25.9%
- Iberia (0.3)% +4.4% +2.3%
- Romania(2) +13.9% +5.3% +8.9%
--------------------------- --------- --------- ---------
Group LFL(3) (5.4)% (2.8)% (4.1)%
--------------------------- --------- --------- ---------
Total e-commerce sales(4) (26.1)% (10.4)% (18.8)%
3-year LFL sales by quarter
Quarterly sales % 3-year LFL Change
---------------------------------
Q1 22/23 Q2 22/23 H1 22/23
UK & Ireland +16.7% +15.3% +16.0%
- B&Q +16.3% +17.1% +16.7%
- Screwfix +18.0% +11.0% +14.4%
France +13.7% +13.8% +13.6%
- Castorama +13.9% +13.5% +13.4%
- Brico Dépôt +13.5% +14.1% +13.8%
Other International +22.2% +25.7% +24.3%
- Poland +22.8% +25.2% +23.8%
- Iberia +11.8% +18.8% +15.6%
- Romania(2) +32.8% +46.7% +43.6%
--------------------------- --------- --------- ---------
Group LFL(3) +16.2% +16.7% +16.6%
--------------------------- --------- --------- ---------
Total e-commerce sales(4) +163.7% +149.6% +156.3%
Trading in Q2 22/23
LFL sales were down by 2.8% in Q2 and up 16.7% on a 3-year
basis, showing continued good momentum from Q1. Adjusting for
calendar impacts, Q2 LFL sales were up 17.4% on a 3-year basis, up
from 14.8% in Q1. E-commerce sales were down by 10% in Q2 as
footfall returned to stores but up by 150% on a 3-year basis. Sales
remained resilient across our banners, with all reporting
double-digit 3-year LFL growth, and across customer segments (DIY*
and DIFM*/trade). This resulted in trading in line with our
expectations, supported by our focus on execution and market share
gains.
In the UK, B&Q saw an overall improvement in 1-year LFL
trends from Q1 to Q2, benefiting from more favourable weather and
improved product availability. Sales of cooling products at B&Q
were particularly strong in July given the unusual heatwave.
B&Q's 3-year LFL increased from Q1 to Q2 while Screwfix's
decreased somewhat, with lower YoY DIY revenues linked to very
strong demand in the prior year. 3-year LFL growth of B&Q and
Screwfix's trade revenues continued to be strong.
In France, 3-year LFL trends were similar from Q1 to Q2 with
seasonal categories also driving a modest improvement at Brico
Dépôt.
Poland, Iberia and Romania all saw growth on a 1-year basis, and
an acceleration into Q2 of 3-year trends, driven by strengthening
competitive positions and effective trading activities.
Current trading in Q3 22/23
Q3 22/23 LFL sales (to 17 September 2022)(5) are down by 0.7%,
reflecting strong comparatives in the prior year. On a 3-year
basis, LFL sales are up 15.2%, with resilient sales trends in our
outdoor, kitchen, and bathroom & storage categories. E-commerce
sales continue to progress well, and we are pleased with the strong
performance of our new marketplace proposition at B&Q.
Footnotes
(1) Kingfisher's subsidiary in Romania has historically prepared
its financial statements to 31 December. In the prior year (FY
21/22), Romania migrated to Kingfisher's financial reporting
calendar (year ended 31 January). Its retail loss presented in H1
21/22 therefore included one additional month of results (July
2021) in order to facilitate the alignment to Kingfisher's
financial reporting calendar. Reported and constant currency
variances for Romania's retail loss are for February to July 2022
(compared against January to July 2021).
(2) Further to footnote 1 above, Romania's LFL and 3-year LFL
sales growth compares equivalent periods in the current and prior
years.
(3) Group LFL includes e-commerce sales, and excludes Koçta
(Kingfisher's 50% JV in Turkey). Other International and Group LFL
on a 3-year basis exclude Russia. (Kingfisher completed the sale of
Castorama Russia on 30 September 2020.)
(4) Total e-commerce sales are first-party e-commerce sales plus
marketplace gross sales. Please refer to the glossary in Section 6
for definitions. References to digital or e-commerce sales growth
relates to growth at constant currency and covers the total Group.
3-year total e-commerce sales growth excludes Russia.
(5) 'Q3 22/23 LFL sales (to 17 September 2022)' represents the
period from 31 July 2022 to 17 September 2022 compared against the
equivalent period in the prior year (i.e., 1 August 2021 to 18
September 2021). The corresponding 3-year LFL represents the period
31 July 2022 to 17 September 2022 compared against the equivalent
period in FY 19/20 (i.e., 4 August 2019 to 21 September 2019). The
figures are provisional and exclude certain non-cash accounting
adjustments relating to revenue recognition.
Section 2: Group update (including 'Powered by Kingfisher'
strategic plan)
The update is organised into the following key topics:
1) Update on Ukraine
2) Delivering on value and effectively managing pressures arising from the current environment
3) France - on track to complete 'fixes' in H2
4) Strong execution against our 'Powered by Kingfisher' strategic priorities
5) Clear financial priorities and capital allocation framework
1. Update on Ukraine
Our thoughts are with the people in Ukraine and Eastern Europe
who are affected by the conflict. We are part of the international
effort to support them and we stand ready to help further.
At the start of the crisis, we immediately offered our aid for
Ukrainian refugees, with all our retail banners working with
organisations who are supporting relief efforts, such as the
International Red Cross and United Nations High Commission for
Refugees (UNHCR). Kingfisher has donated c.GBP0.5m to help these
organisations, including matched funding for colleague donations to
the Red Cross Ukraine Crisis Appeal.
Two of our banners, Castorama Poland and Brico Dépôt Romania,
are in countries bordering Ukraine and have been working hard to
provide funds and practical assistance to refugees. Across all our
other banners, our teams have been raising money and organising
support for refugees, including establishing in-store and online
donation facilities for customers. This allows them to donate funds
or essentials such as clothes, blankets, medicines and hygiene
products. In addition, B&Q is donating profits from the sale of
certain products, and many of our banners have worked closely with
the Red Cross to find employment for refugees in our stores.
Many of our colleagues have been personally affected by the war,
particularly in Poland which is home to many people of Ukrainian
descent. Castorama Poland has made counselling available for all
store and head office employees, recognising that the war is a
source of stress and anxiety, particularly for colleagues whose
friends or family are directly affected. In Romania, Brico Dépôt
has supported colleagues via a hotline offering free and anonymous
counselling, as well as legal and financial advice.
The Group has no direct business exposure to the conflict,
having completed the sale of Castorama Russia to Maxidom, a Russian
home improvement company, in September 2020. We have no operations
in the country, and we do not provide sourcing to Maxidom.
We have not seen disruption to our supply chain to date. On 1
March 2022, we decided to stop selling the limited number of
products directly sourced from Russian and Belarusian suppliers
across the Group, and removed those products from our shelves. We
are also engaging with our suppliers to help ensure that they are
no longer sourcing materials or components from Russia or
Belarus.
2. Delivering on value and effectively managing pressures arising from the current environment
We are committed to delivering value for our customers, at a
time when they need it most, while also effectively managing
near-term operational challenges that continue to impact our
industry and markets.
Inflation
In common with other businesses, we have seen higher than normal
cost price inflation (CPI) over the last 18 months, caused by
rising prices for raw materials, energy, wage increases and higher
freight costs.
As expected, year on year CPI stepped up in H1 as we sold
through higher-cost inventory and experienced higher contracted
freight prices. We continue to manage these impacts
effectively.
While many raw material prices such as metals and plastics are
now below their recent peaks, and maritime freight costs (i.e.,
spot rates) have been on a downward trend since January, we expect
inflationary pressures to persist in H2 due to the time lag between
ordering products (at a relatively higher cost) and their
subsequent sale (and therefore cost recognition in our income
statement). Favourable movements in our YoY foreign exchange
hedging positions will offset some of the increases. Approximately
20% of our cost of goods sold (COGS) is directly sourced in USD,
and we maintain hedging contracts for periods up to 18 months, with
our forecast USD COGS exposure in FY 22/23 fully hedged.
Supply and logistics
High demand, port congestion and COVID lockdowns have placed
considerable strain on the industry's global supply and logistics
network over the last two years.
To date, the strength and expertise of our supply, sourcing and
logistics teams have enabled us to manage our supply and logistics
needs effectively. We decided in the summer of 2021 to build
inventory from Q4 21/22 in order to further improve our product
availability, to secure seasonal and 'buffer' stock ahead of our
peak trading season, and to purchase ahead of anticipated further
cost price inflation. We have worked closely with suppliers and
logistics providers, helping us to mitigate industry-wide
availability issues. The key product availability risks that we saw
in FY 21/22 have eased in H1 and we are pleased with both overall
and 'best seller' product availability, which have been at
pre-pandemic levels since Q1. This has supported our continued
market share gains .
Costs and capacity in the global freight market was a constant
challenge in 2021. We have carefully managed freight costs and
availability, and successfully navigated through shortages of heavy
goods vehicles drivers. Whilst we expect to experience higher YoY
freight costs throughout 2022, we note that the freight headwinds
noted above that have forced prices up over the last 18 months have
been easing since January.
For further details please refer to 'Source and buy better,
reduce costs and same-store inventory', below.
Delivering on value
In this inflationary environment, Kingfisher is strongly
committed to deliver on value for our customers.
We are mindful of the impact rising consumer prices could have
on customer demand. Our focus on attractive price positioning
across the Group means we are well positioned, with an aim to
maintain a price index at 100 or below versus our nearest
competitors. Customers can also choose lower-priced and
high-quality products from our own exclusive brand (OEB) ranges,
which represented 45% of Group sales in H1 22/23 (H1 21/22: 46%).
We also have some of the industry's best hard discounters in Brico
Dépôt France and Iberia, who together represent c.20% of Group
sales.
Of particular importance in the current environment, we are also
very well placed in energy efficiency categories such as loft
insulation, LED lighting, underfloor heating and electric
radiators, and we are developing other innovative solutions to
actively support our customers as they look to mitigate the impact
of rising energy costs. For further details please refer to 'Build
a mobile-first and service orientated customer experience' and
'Lead the industry in Responsible Business practices' , below.
3. France - on track to complete 'fixes' in H2
The Group's strategic progress over the last two and a half
years has benefited from some of the capabilities that we had
previously developed. These include Group sourcing and buying,
developing our OEBs and our investment in a common SAP platform.
However, we also faced many unresolved issues from previous
years.
As part of our 'Powered by Kingfisher' plan, we set out our
'focus and fix' priorities to address these issues. We made rapid
progress in FY 21/22, completing all the required 'fixes' in the UK
and Poland and we are on track to complete our 'fixes' in France
this year.
These actions have significantly improved our trading, both in
store and online, while supporting the roll-out of our
strategy.
Set out below is our progress with the France 'fixes' in H1:
-- We progressed the roll-out of Brico Dépôt's updated SAP
platform without disruption and expect to complete it before the
end of FY 22/23.
-- We are also on track with implementing 'seamless payments'
and 'dotcom+' solutions in all Castorama stores by the end of FY
22/23. 'Seamless payments' is an up-to-date and frictionless
customer payment experience, enabling self-checkout and 'Scan &
Go' technologies, and 'dotcom+' is an in-store ordering solution,
enabling more digitally-enabled sales*. Both solutions have already
been successfully introduced at B&Q, leading to significant
improvements in the customer proposition and experience.
-- We continue to reorganise our logistics operations in France,
to create an optimised network for Castorama and Brico Dépôt. We
have made significant progress with optimising distribution centre
space, as well as transforming our cross-dock sites. The final
distribution centre space reductions in France will be completed
this month, bringing cumulative space reduction to c.27% versus two
years ago (c.19% as of 31 July 2022).
- Note: cross-docking is a logistics practice of moving product
from a manufacturer to stores through a cross-dock facility, with
little or no storage in between.
-- This programme will significantly reduce the travel distance
required to service our stores, resulting in shorter lead-times,
better customer service, lower inventory and reduced greenhouse gas
emissions.
-- We continue to make good progress with extending and
optimising Castorama's ranges, by introducing more local and
international brands, and by launching new OEBs. We added more than
1,200 SKUs over the last six months, bringing the total added over
the last two and half years to more than 8,500. As previously
announced, we expect to complete our work on improving Castorama's
range by the end of FY 22/23.
-- Brico Dépôt, one of our industry's leading discounter
banners, is also optimising its range to increase its
differentiation from Castorama and other general DIY peers. We are
improving the banner's already price-leading proposition, reducing
some non-core ranges and introducing discount OEBs (such as the
Evalux paint discount brand) and more local trade brands.
Optimising SKUs will give us more volume and pricing power for key
products, reinforcing Brico Dépôt's 'discounter DNA'.
-- Our price positioning in France is very competitive, with
both banners improving their price index this year. While we do not
anticipate requiring any further significant investment in price
for the remainder of the year, the DNA of a discounter like Brico
Dépôt is to continuously reduce its cost to sales ratio, improve
its sales density and reinvest part of this efficiency into price
positioning.
-- Following Pascal Gil's appointment as the CEO of Castorama
Poland (in early April 2022), Laurent Vittoz has moved from leading
our Group Sourcing team to replace Pascal as the Managing Director
of Brico Dépôt, reporting to the CEO of Kingfisher France, Alain
Rabec.
The actions described above, along with continued strong
delivery against our wider strategic priorities, have contributed
to a significantly improved performance in France over the last two
and a half years. 3-year LFL sales are up 13.6% in France and,
following years of underperformance, France's LFL sales are growing
ahead of the market. Based on Banque de France* data, France's H1
22/23 LFL sales grew ahead of the market YoY.
The completion of our 'fixes' in France will also help us
deliver on our priority of more profitable growth in France. In H1,
in constant currency, France's retail profit margin improved 30
basis points to 5.6% (H1 21/22: 5.3%), with its retail profit
increasing 2.4%.
C ustomers have reacted positively to our work in France, with
Net Promoter Scores (NPS) improving in both French banners. The
store NPS for both Castorama and Brico Dépôt France have improved
over the last three years, with an increase of +12 and +10 points,
respectively. We have also made considerable progress online, with
castorama.fr showing a +29 point increase in NPS, and bricodepot.fr
showing a +20 point improvement over the last three years.
4. Strong execution against our 'Powered by Kingfisher' strategic priorities
In June 2020, we announced our strategic plan - 'Powered by
Kingfisher'. This plan aims to maximise the benefits of combining
our distinct retail banners (which serve a range of different
customer needs) with the scale, strength and expertise of the
Kingfisher Group, so we can address the significant growth
opportunities we see in the home improvement market.
Our retail banners occupy number one or two positions in all our
key markets. Some are predominantly trade focused (Screwfix,
TradePoint), while others address more general DIY needs (B&Q,
Castorama France, Castorama Poland, Brico Dépôt Romania, Koçta ),
and Brico Dépôt France and Brico Dépôt Iberia are discounters. This
differentiation is a major strength for us, especially in a more
volatile and uncertain world.
Kingfisher's scale and resources are an important source of
growth and competitive advantage for our banners. They benefit from
Group-wide OEB product development, sourcing and buying scale,
leading technologies, customer and market data insight and
analysis, shared services and best practices, and cost and
inventory management support.
We are pleased with the progress we have made over the last
three years, achieved in an extraordinarily challenging operating
environment. We have made good progress with our core strategic
priorities whilst investing for growth in multiple areas of the
business. This has driven an improved competitive position in our
key markets.
The following sub-section covers the progress made in H1 against
our key strategic focus areas:
a) Grow e-commerce sales
b) Differentiate and grow through own exclusive brands (OEB)
c) Build a mobile-first and service orientated customer experience
d) Test compact store concepts and adapt our store footprint
e) Expand engagement with trade customers
f) Source and buy better, reduce costs and same-store inventory
g) Lead the industry in Responsible Business practices
a) Grow e-commerce sales
We are committed to growing our e-commerce sales by offering
speed, convenience and choice to our customers.
E-commerce sales remain significantly ahead of pre-pandemic
trends, driven by improvements to our e-commerce proposition that
offer our customers more convenience, broader product choice and
faster fulfilment of orders, powered by our store assets.
Total e-commerce sales, which for the first time this period
includes gross sales from third-party e-commerce marketplace
transactions, as well as first-party e-commerce sales*, were
GBP1.1bn in H1. This represents a decline of 19% YoY (in constant
currency), and an increase of 156% on a 3-year basis. Overall
e-commerce sales penetration was 16% in H1 (H1 21/22: 19%; H1
19/20: 7%). Our digitally-enabled sales were c.24% (FY 21/22: 26%;
FY 19/20: 20%), highlighting that approximately a quarter of Group
sales are from e-commerce channels and online orders placed
in-store, delivered through click & collect (C&C) or to
customer homes. We expect digitally-enabled sales to continue to
grow over time, in line with the continued evolution of both
customer behaviours and our in-store technologies and
solutions.
Sales from C&C, our most popular online fulfilment channel,
were down 22% YoY reflecting very strong prior year comparatives,
although remain ahead of pre-pandemic levels with growth of 195% on
a 3-year basis. C&C accounted for 87% of total e-commerce
orders (H1 21/22: 87%) and 70% of total e-commerce sales (H1 21/22:
73%). The popularity of this fulfilment channel has been supported
by significant enhancements to the options available to customers
to collect their orders, including car park collection capabilities
in France, as well as contactless 'Drive-thru' collections in both
France and Poland, for all our medium and large stores. During H1
we completed the roll-out of C&C lockers to Castorama Poland
stores and continued testing C&C lockers at some B&Q
stores. Our new store format trials are also increasing C&C
options for customers, in particular through our high street
compact stores, which allow us to expand into city centres.
Home delivery sales were down 11% YoY reflecting higher footfall
in stores, and up by 97% on a 3-year basis. Faster fulfilment is a
key competitive advantage for our banners, in particular over
'pure-play' online peers, so we have increased our focus on
next-day and same-day home delivery. In August 2021, Screwfix
launched Screwfix 'Sprint', offering delivery direct to home or
site within one hour. 'Sprint' is currently available from over 300
stores, covering c.45% of UK postcodes, with further roll-out
planned in H2. So far, the average delivery time is c.45 minutes
and our quickest delivery is just eight minutes. Feedback from
customers, especially our most loyal trade customers, has been very
positive, and we believe this will help us to continue growing our
market share. 'Sprint' reinforces Screwfix's focus on speed and
convenience for customers, alongside its industry-leading
one-minute C&C proposition. We are sharing lessons from the
roll-out with other retail banners that are testing same-day
delivery, including B&Q.
Moving to store-based picking and fulfilment has been critical
to enabling us to serve our customers efficiently, in line with the
scaling up of e-commerce volumes over the last two and a half
years, reaching up to 1.5 million orders a week at peak. This also
gives us the ability to flex up or down in response to short term
changes in demand, without being exposed to high fixed costs. In
H1, we picked 91% of the Group's e-commerce orders in store
(excluding Screwfix: 87%). We are also leveraging our stores to
improve the speed and cost of home deliveries. At present, 54
B&Q stores are being used as 'digital hubs' for fulfilling home
deliveries, serving nearly 100% of UK postcodes. These hub stores
are selected based on their catchment and the depth of their
in-store range. Similar models have been introduced at Castorama
France and Castorama Poland.
Several innovative digital initiatives are being developed and
tested at B&Q, with a view to broader adoption across
Kingfisher's retail banners. During H1 we commenced the development
of optimised order management capabilities, leveraging B&Q's
hub stores to cast a wider net for the availability of products
ordered online, thereby lowering the rate of abandonment of online
baskets. The business is also testing a new product substitution
algorithm to help minimise lost sales. Finally, B&Q rolled out
new capability in digital colleague apps to enable more efficient
picking, stock accuracy and shelf re-organisation, whilst unlocking
improved stock updates for an improved online customer
experience.
Finally, we believe we can add significant value for customers
by offering them more product choice. Kingfisher is very well
placed to benefit from the growing trend of shopping on e-commerce
marketplaces. Our retail banners have top one or two market
positions; they already have significant online traffic; they have
strong brands and are trusted by millions of customers; they are
able to leverage their store assets to offer faster delivery,
pick-up and return options for customers; and they have
long-standing and trusted relationships with a growing global
supplier base.
Using scalable technology built by Kingfisher alongside Mirakl,
the leading marketplace platform provider, we launched our first
e-commerce marketplace on B&Q's www.diy.com in March 2022.
Approximately 200 carefully selected third-party sellers are now
offering new products in 10 home improvement categories, including
wallpaper, lighting, power tools and small domestic appliances, the
latter being a new category for B&Q. B&Q successfully
reached its target of 100,000 additional home improvement SKUs
within six months of launch, compared to its previous offer of
c.40,000 products. B&Q's marketplace has grown quickly since
March, reaching a marketplace participation* of 8% in August 2022
(i.e., B&Q's marketplace gross sales divided by B&Q's total
e-commerce sales). Over the medium term, further rapid expansion of
the number of SKUs is planned, and in addition we are preparing for
the roll-out of marketplaces in France, Poland, Spain and Portugal,
leveraging the technology already built by Kingfisher for
B&Q.
b) Differentiate and grow through own exclusive brands (OEB)
We believe that our OEB product development is a significant
source of value for our retail banners and their customers. OEBs
provide a strong point of differentiation in terms of design,
functionality, sustainability and value for money, as well as
carrying a higher gross margin (on average) than branded products.
We aim to grow our OEB sales further, as we bring even more
innovation to our ranges and differentiation to our banners.
With the households in our markets being impacted by the rising
cost of living, the differentiation brought by our OEB proposition
is more important than ever. From an affordability perspective, our
OEB products are, on average, 15-30% cheaper than branded products
(for example, our Erbauer brand compared to its branded power tool
competitors). However, it's not just about affordability. Our OEBs
provide an opportunity to meet customer needs by designing
innovative products, whilst also supporting our ambitious
sustainability goals. For example, with our Verve brand we aim to
make our watering products affordable and accessible, whilst
simplifying the user experience and using our innovation to adopt
recycled plastic and water-saving features.
As well as promoting affordability and sustainability, our OEBs
aim to simplify projects, thereby encouraging and engaging more
people to complete home improvement tasks. For example, earlier
this year we launched new OEB sealants ranges, Volden and No
Nonsense, which includes an ecosystem of products to help customers
at all stages of their projects. This includes tools to remove old
sealants, smoothing tools and an award-winning applicator system.
In H1, sales of our Volden and No Nonsense sealant products were up
both YoY and on a 3-year basis.
The performance of our OEB ranges in H1 was resilient against
very strong prior year comparatives, with LFL sales down 5.2%. LFL
sales were up 18.1% on a 3-year basis, outperforming the growth of
non-OEB ranges. Total OEB sales were GBP3.1bn, representing 45% of
Group sales (H1 21/22: 46%). This is particularly impressive when
considering our retail banners' renewed focus on offering more
choice to customers, including through a wider range of local and
international branded products. Kingfisher's top five OEBs, based
on their breadth of differentiated ranges, innovation and growth
potential, are GoodHome, Verve, Erbauer, Magnusson and LAP. These
contributed 19% of total Group sales (H1 21/22: 19%; FY 19/20:
11%).
We are leveraging our OEB capabilities to provide differentiated
and specialised products for our general home improvement, trade
and discounter banners. Over the last 18 months, we have developed
a strong pipeline of innovative products, with an overall portfolio
of 32 new and redeveloped OEBs. The roll-out of these OEBs is now
almost complete, and we will be looking to further extend the new
OEB pipeline in H2. For example, Evalux, a high-performance
discount paint range sold only at Brico Dépôt France, has been
performing well since its launch earlier this year. During H1 we
relaunched GoodHome paint in all our general home improvement
banners to create an unrivalled paint offering from selected
ready-mixed colours for customers, increasing choice to 2.2 million
paint options via tinting machines. This relaunch includes our
first bio-based paint, Naturea. At B&Q and Screwfix,
respectively, we are launching new featured ranges for MacAllister
and Titan power tools incorporating a better battery platform,
whilst keeping our selling prices low, helping to make home
improvement projects easier and more cost-efficient.
The OEB kitchen range continues to receive strong customer
feedback on design, innovation and value for money. It remains one
of our top-performing new ranges for the Group and has been a key
contributor to our banners' market share growth. Supported by
market-leading price positioning, installation services and an
enhanced in-store sales journey, the Group LFL sales performance of
the new kitchen range was positive in H1 (mid-single digit %
growth), up by nearly 20% on a 3-year basis. B&Q is further
enhancing its digitally-enabled customer journey for kitchens by
testing virtual reality technology in 10 stores. This allows
customers to visualise pre-set 3D kitchen designs through virtual
reality headsets in-store. The performance of our kitchen range at
Castorama Poland has demonstrated our ability to create a new
market opportunity having the right combination of offer, price and
service, delivering over 60% LFL sales growth in H1.
Our OEB ranges have also given us a platform to accelerate our
Responsible Business goals, with our sustainability guidelines
fully integrated into OEB product design and development.
Sustainable Home Products (SHPs) either help our customers live
more sustainably (such as water-saving taps or loft insulation) or
are sustainable because of their input materials or how they are
manufactured (for example, FSC timber, peat-free compost or
recycled plastic). In FY 21/22, 55% of OEB product sales were SHPs.
Two OEB ranges, GoodHome and Verve, have already exceeded their SHP
sales targets. Please also refer to 'Lead the industry in
Responsible Business practices' below for more details on how we
are using OEB to drive further SHP growth, including more energy
and water-efficient products.
We are also looking at ways for our OEB products to play a
bigger role in the 'circular economy'. For example, B&Q and
Castorama France have begun offering tool repair and maintenance
services. For further details please refer to 'Build a mobile-first
and service orientated customer experience', below.
c) Build a mobile-first and service orientated customer experience
Our mission is to grow our mobile channel by creating great
customer experiences. We will continue to grow our active app user
base by optimising our app stores, using push messaging and in-app
offers, and improving design and performance. We are also providing
customers with a more compelling and complete range of services,
including augmented reality, 3D design tools, and installation
services.
Mobile remains our largest and fastest growing channel (versus
desktop and tablet) and has performed strongly compared to
pre-pandemic levels. Sales through the mobile channel were down 19%
in H1 but up 280% on a 3-year basis, accounting for 54% of our
first-party e-commerce sales (H1 21/22: 54%). This is an increase
of 18 percentage points since H1 19/20.
Across our banners, we continue to optimise the mobile user
experience through Group-driven technology and capabilities, which
is resulting in faster page-loading times, enhanced 'search, shop
and pay' features, and new mobile tools and features. We are
providing customers with unique, app-first experiences such as
Screwfix 'Sprint' (home delivery within one hour), and features
that enable greater customer convenience and self-service within
our stores. Since its launch in February 2021, our new Screwfix app
has been downloaded 2.6m times, with 30x faster search results and
6% higher conversion versus the Screwfix website. The app also uses
geolocation to speed up in-store pickups, and enables targeted
customer offers. Brico Dépôt Iberia launched its trade customer
loyalty app in Q1, with strong early results.
We are automating marketing campaigns and maturing our mobile
and app capabilities, giving us the ability to test prototypes and
run faster 'A/B tests' (meaning we compare two versions of a
webpage or app to see which performs better). This is giving our
teams richer data, which we can use to optimise the experience for
our most frequent and valuable customers. We have also unlocked
push notifications across the B&Q, Castorama France and
Screwfix apps, thereby driving user traffic.
We are continuing to modernise the in-store experience and now
have self-checkout terminals in 261 stores across B&Q (169),
Castorama France (49) and Castorama Poland (43). We are seeing very
strong adoption by customers in store, ahead of expectations,
resulting in meaningful efficiency gains. Following successful
tests, Scan & Go apps in B&Q, Brico Dépôt France and Brico
Dépôt Iberia continue to make the checkout experience faster.
B&Q and Castorama France are also testing in-store digital
ordering terminals to modernise the purchasing experience.
We also continue to test different payment options online, with
'Buy Now, Pay Later' and 'Pay in Instalments' options available via
PayPal in the UK and France. Additionally, new credit options for
all customers (trade and non-trade) are being developed in H2 with
third-party providers.
Following the successful introduction of our Group-developed 3D
design tool for kitchens, we have extended the technology to enable
customers to create 3D designs of bathrooms, storage furniture, and
fireplaces. Furthermore, to make it easier for customers to
visualise their projects, we are testing virtual reality headsets
and widescreen panoramic experiences in 10 B&Q stores, with the
ambition to roll these out across B&Q if successful.
We are continuing to grow our installations and services offer
for our DIFM customers. Both kitchen and bathroom installation
services are now available in all our general home improvement and
discounter banners. Group sales of showroom products with
installations increased by 56% YoY in H1. NeedHelp, our leading
home improvement services marketplace, is now live throughout the
UK, France and Poland. In H1, we saw good growth of the platform,
with a 37% increase YoY of the gross merchandise value of completed
jobs. Screwfix and TradePoint have launched partnerships with
NeedHelp in the UK, providing their tradespeople customers with
free local leads via the NeedHelp platform. Brico Dépôt France also
launched a dedicated kitchen installation service in partnership
with NeedHelp.
We are also launching services that support our Responsible
Business ambitions, and help our customers make choices that are
better for them and more responsible for the planet. To keep
products in use longer, Screwfix and Castorama France have launched
online refurbished product stores. B&Q has introduced a new
Erbauer tool repair service, and Castorama France has partnered
with Swap, the servicing and maintenance company, for outdoor
motorised tools. To help customers (particularly trade customers of
TradePoint) dispose of their project waste responsibly, B&Q has
launched partnerships with AnyJunk and LoveJunk in-store and
online, providing licensed waste clearance and skip hire. B&Q
and Castorama France are continuing their respective tool hire
partnerships with Speedy Hire and LOXAM, with a focus on driving
stronger integration within the customer journey and the
development of online propositions to enable a broader reach.
The ongoing energy crisis adds weight to the urgent need for
greener homes and energy efficiency. In the UK, two thirds of homes
have an energy performance certification rating of 'D', or worse,
and at least 19 million homes need better insulation. In the coming
weeks, B&Q will launch an innovative end-to-end solution to
help customers create a personalised energy efficiency action plan
for their homes, and then access the relevant products and services
via B&Q and its partners to take action.
In France, energy efficiency renovations have become even easier
and more popular, with Castorama and Brico Dépôt launching
dedicated finance products linked to the French government's
MaPrimeRénov grant programme. To further support this initiative,
and deliver value for our customers and help them save energy, in
H2 Castorama will launch partnerships with several national
installers supporting key aspects of energy efficiency improvements
(for example, the installation of air source heat pumps and solar
panels in residential properties). Castorama is also planning to
pilot an energy efficiency audit service which will provide
customers with a view of their energy usage combined with a
tailored plan to increase energy efficiency in their homes . In the
coming weeks, Brico Dépôt France will launch an online energy
diagnostic tool to help customers diagnose and fit energy
efficiency solutions.
d) Test compact store concepts and adapt our store footprint
Stores are a critical part of the home improvement market.
Customers want to be inspired, to be able to visualise what they
buy, and to get advice and design services from in-store experts.
Stores also serve as a 'one-stop shop' for projects and allow us to
provide customised services. Our c.1,500 stores also play an
integral role in meeting the increasing customer demand for
convenience and speed, whether through fast C&C or delivery to
where the customer wants it.
We continue to increase our overall store count, while reducing
the average size of our stores. We aim to achieve this over time by
opening more 'compact stores' (less than 2,000 sqm), rebalancing
our larger size 'new store' opening programme to mostly focus on
'medium-box' stores (2,000 to 8,000 sqm), and 'rightsizing' a
relatively small proportion of our larger format 'big-box' stores
(more than 8,000 sqm).
Compact stores are a key enabler for growing our market share in
urban areas. We have made good progress with testing different
concepts to unlock this opportunity. In H1 we added six compact
stores tests, bringing the total to 31. These tests span three
markets and four retail banners (Screwfix, B&Q, Castorama
France and Castorama Poland), and are located in small retail
parks, high streets and within supermarkets. Further tests are
planned in H2 and 2023 in the UK, France and Poland.
Our high street concept tests (300-800 sqm) are delivering
positive results. We now have eight high street concepts open in
the UK and France, including our first two compact stores in Paris,
which opened in Les Lilas and Levallois in February. We continue to
learn from these tests and optimise subsequent store openings to
create a scalable blueprint for the future. In August, we opened
our first 500 sqm concept store in Poland, in Warsaw, under the
Castorama Express banner.
Our trials of B&Q 'grocery concessions' (200-250 sqm)
continue in ASDA stores in the UK (eight locations to date),
testing and optimising both in-fill (where B&Q stores are in
close proximity) and unserved locations.
Our small retail park store concept tests (800-2,000 sqm)
continue in B&Q (four stores) and in Poland (three stores,
where they trade under the Castorama Smart banner). During H1 we
opened one new small retail park store at each of B&Q and
Castorama Poland. We see positive results from this concept,
especially larger stores in the 1,500-2,000 sqm subset, where we
can provide broader product ranges and services. This concept,
along with our high street stores, support our ambitious store
roll-out strategy in Poland, to increase penetration in small towns
and cities and reinforce Castorama Poland's leading market
position. Brico Dépôt France will also be testing a 1,000 sqm
format in Q1 23/24.
Screwfix continues to test its ultra-compact 'XSR' store format,
which has been developed to take the core Screwfix range into
spaces unable to cater for the full traditional trade counter
offer. Screwfix opened two more 'XSR' stores in H1, bringing its
total to seven, and is successfully experimenting with the format
in a variety of urban and rural locations, with more tests planned
for H2. In addition, the Screwfix 'Collect' concept, launched in
London Victoria in 2020, has seen a complete overhaul of the
customer experience and range, and is performing ahead of
expectations.
Store rightsizings completed in the last 12-18 months have shown
very encouraging results. The three B&Q 'big-box' rightsizings
completed in FY 21/22 saw c.15-30% of space taken over by
discounter retailers, bringing incremental footfall to the vicinity
of these stores. Since reopening, the stores have exceeded our
performance expectations, with strong sales retention and improved
profitability. In France, where we completed two 'big-box'
rightsizings at Castorama France (Gonesse and La Rochelle) in
January 2022, we have selected a grocery partner to fill the
vacated c.20-30% space. Initial sales of these rightsized stores
are positive. Further rightsizings are planned in H2.
As a reminder, last year we announced that we expect up to 40
'big-box' stores across B&Q and Castorama France to be
rightsized over 10 years, including the reallocation of space to
e-commerce operations and fulfilment hubs. This space reduction
equates to a relatively small proportion of Kingfisher's store
estate, and approximately 3% to 4% of the combined selling space of
B&Q and Castorama France.
Finally, we believe partnerships can enable Kingfisher to
attract new customers and generate incremental revenues. Earlier
this year we opened our first franchise store under the B&Q
banner in the Middle East, with a further store opening in May. The
stores and support office functions are fully operated and staffed
by the Al-Futtaim Group ( https://www.alfuttaim.com/ ).
e) Expand engagement with trade customers
Trade customers are an integral part of the home improvement
ecosystem and a key priority for Kingfisher. While we already have
strong and growing participation, there are significant
opportunities to engage further with trade customers. This includes
continuing to roll-out trade counters, international expansion,
digital enhancements, range expansion, loyalty programme
optimisation, improved merchandising, more partnerships and new
services.
Screwfix, the UK's number one light-trade retailer, continues to
expand through its capital-light small format outlets. We are
pleased to have opened 31 new outlets in H1 (28 in the UK and three
in Ireland), bringing the total to 821 as of 31 July 2022. We are
on track to reach our goal of over 80 new stores this financial
year and remain confident of reaching more than 1,000 stores in the
medium term in the UK & Ireland.
As part of our international expansion plans, Screwfix launched
as a pure-play online retailer in France in April 2021. Results
have been very encouraging, with strong web traffic and conversion
rates, and growing brand awareness across the country. We are
making good progress with building a new supply chain, with our
first distribution centre now open, and a strong pipeline of local
and national vendors selected and onboarded. We expect to open
Screwfix's first stores in France within a few weeks from now ,
with a meaningful step-up in roll-out targeted in 2023. This will
position us to start taking share from the large trade segment in
France, which has an estimated total market size of over
GBP20bn.
B&Q's trade-focused banner, TradePoint, continues to build
strong foundations for growth. TradePoint's LFL sales outperformed
the rest of B&Q (and Screwfix) in H1, down just 3.1% in H1,
with low single-digit growth in Q2 despite strong comparatives.
TradePoint's 3-year LFL sales were up 34% in H1. This brings the
business to GBP435m of sales in H1, representing 21% of B&Q's
total sales (H1 21/22: 19%). Looking forward, we have put together
a strong plan to drive TradePoint's annual sales to more than
GBP1bn. Work is underway to develop and grow TradePoint's loyalty
programme, implement new trading approaches, update and expand
TradePoint's store counters, implement new trade-specific ranges
(such as Harris Trade, Turbo Silver/Gold and No Nonsense) and
services (such as tool hire - see below), and enhance the business'
digital and online experience. Work is also ongoing to launch the
TradePoint proposition in Ireland.
More broadly, we believe there is a significant opportunity to
increase trade customer penetration across all our other retail
banners, benefitting from lessons learned in Screwfix and through
TradePoint's successful relaunch. Over time, we expect increased
trade customer penetration to contribute to higher sales and profit
growth. In H1, we launched our Trade 'Centre of Excellence' at
Kingfisher, to bring together experts from across our banners and
Group functions to share knowledge, insights and feedback from
customers. We are aligning our trade strategy across five key
pillars: store formats, pricing and loyalty, product range,
services and digital.
Within store formats, we are considering dedicated trade
counters in France, Poland and Iberia. The initial focus on pricing
and loyalty saw the pilot launches of pro loyalty programmes in
Poland and Iberia in H1, with encouraging early results. Within
product range, other than the new ranges launched in TradePoint, as
noted above, we launched our new OEB Erbauer 12V power tool range
in Screwfix and Castorama France. The 12V ecosystem provides a more
compact range to our 18V offer, bringing power tool capabilities to
smaller areas, ideal for tradespeople working in confined spaces or
on more intricate work where larger tools are inefficient. In
August, Screwfix announced a partnership with decorating specialist
Lick to exclusively distribute LickPro, a high-quality paint range
of 127 trend-led colours specifically designed for tradespeople,
with high opacity, low splatter and minimal clean-up. Lick and
Screwfix will also pioneer innovative new technology to reduce
waste. Once an order is placed with Screwfix, it will be sent to
the Lick master paint mixer who combines technology and engineering
in its manufacturing process to reduce unnecessary waste generated
by pre-mixed paint. Additionally, LickPro paints reinforce
Screwfix's commitment to sustainability, with the range being low
odour, low VOC (volatile organic compound), and water-based for
improved indoor air quality. In H2, we plan to bring several more
new and innovative trade-focused products to market.
In services, in H1 we expanded our tool hire tests by a further
10 stores, with tool and equipment hire now available in 79 stores
across B&Q (38) and Castorama France (41), through partnerships
with Speedy Hire and LOXAM, respectively. To further support our
partnership, in H1 we developed an online referral process to
Speedy Hire for TradePoint.co.uk customers. Our partnerships with
AnyJunk and LoveJunk are being directly targeted towards the trade
customers of TradePoint, to make responsible waste disposal for
projects easily accessible. In digital, Screwfix 'Sprint' continues
to deliver essential items to trade customers within one hour,
exclusively on the Screwfix app. In 2023, TradePoint is planning to
launch a dedicated app to make membership tracking and purchases
easier to complete, and we are increasingly utilising our scale and
data expertise to drive tradesperson loyalty through more relevant
and personalised content.
f) Source and buy better, reduce costs and same-store inventory
We have identified significant opportunities to reduce costs
across Kingfisher, through initiatives covering store productivity,
goods not for resale (GNFR*), supply and logistics, overheads and
property (including lease renegotiations). In addition, through
value engineering and the use of our scale, we expect to extract
further value from sourcing and buying. Reducing same-store
inventory levels is also a priority.
Costs
Over the last two and a half years we have had multiple
cost-reduction projects in place covering all of our retail banners
and Group teams, with robust governance at Group Executive and
Board level. The following areas have contributed to partially
offsetting cost growth in H1 22:
-- Store productivity - Increasing staff productivity through
the use of technology and implementing new store operating
procedures. In particular, we have now rolled out self-checkout
terminals in 261 stores across B&Q (169), Castorama France (49)
and Castorama Poland (43), with strong take-up from customers. We
are also reducing shrinkage through increased use of analytics, and
implementing best practices to higher risk areas. For further
details please refer to 'Build a mobile-first and service
orientated customer experience', above.
-- GNFR optimisation - Our category managers with Group-wide
responsibilities and local procurement teams continue to optimise a
c.GBP1.9bn GNFR spend through over 220 projects, 70 of which each
deliver more than GBP0.25m of annualised savings.
-- Supply and logistics - Kingfisher's supply and logistics
teams continued to work on distribution centre space reduction,
network optimisation and operational efficiency. Next to the
significant distribution centre space reductions in France (see '
France - on track to complete 'fixes' in H2' above), major
improvements were also realised in the UK, with the opening of a
new bulk distribution centre for B&Q and the automation of
Screwfix's site in Trentham.
-- Overheads - Savings were realised across Group and banner
head offices, including through the expansion of the use of our
shared service centre in Krakow, Poland.
-- Property - Completed 34 B&Q lease renegotiations over the
last 12 months, with an average net rent reduction of 19%,
alongside improved lease terms. We are seeing positive initial
results from the five rightsized stores from last year, and have
plans to complete further rightsizings in H2. For further details
please refer to 'Test compact store concepts and adapt our store
footprint' , above.
Over the course of the pandemic, we learnt multiple lessons
about how to significantly adjust our cost base during times of
volatile sales. We understand and prepare for a range of trading
scenarios, with corresponding plans to adjust our cost base quickly
when we need to, including reducing discretionary P&L spend and
operating measures to reduce variable store costs.
Inventory
Our priority over the last two years has been to secure
inventory and improve availability for our customers, amidst
unprecedented global supply chain and logistics challenges, as well
as to improve the quality of our inventory. As and when a more
'normalised' environment emerges, we believe there are
opportunities to unlock further efficiencies in our supply chain
and inventory management.
As described in the 'Supply and logistics' section, above,
overall and 'best seller' product availability has gradually
improved over the last year and is now back to pre-pandemic levels
(since Q1). In the longer-term, our initiatives to reduce
same-store inventory include better ranging and deployment (with a
focus on further removing slow-moving inventory) and more agile
planning and forecasting. Completing our SAP roll-out and further
implementing and optimising our Group digital technology stack will
support these initiatives.
In constant currency, net inventory at the end of H1 increased
by GBP449m to GBP3,138m (H1 21/22: GBP2,730m at reported rates).
61% of the increase is related to higher product purchase cost with
an additional 7 % driven by additional stock to support our store
expansion programme. The balance includes proactive inventory
purchases from Q4 21/22 to (i) rebuild product availability, (ii)
build seasonal and 'buffer' stock ahead of peak trading, and (iii)
secure lower cost stock. Net stock days increased by 19 % YoY in
H1, and are stable versus H1 19/20. All our banners are deploying
actions to reduce inventory, including managing existing orders and
optimising our replenishment systems (e.g., re-adjusting for lower
supplier lead-times and lower security stock parameters).
Same-store net inventory* (in constant currency) increased by
GBP417m (16 % ), driven by higher cost of goods sold and our
proactive inventory purchases from Q4 last year . On a 3-year basis
the increase in same-store inventory (in constant currency) was
GBP593m (24 % ), with net stock days 3% (4 days) higher than H1
19/20 (excluding Russia).
Our inventory remains healthy, with stock provisioning rates
below pre-pandemic levels .
Sourcing
In sourcing and buying, we continue to deliver cost and
operational efficiencies by leveraging our Group scale. By using a
value engineering approach, we continue to deliver sourcing
benefits on our large OEB product base (45% of Group sales in H1
22/23), which helped to partly mitigate the impact of cost price
inflation during the year.
We continue to make progress on our sourcing diversification
plan, by increasing our 'near-sourcing' footprint and exploring
dual sourcing where possible. Our sourcing teams are also working
closely with our OEB teams on value engineering projects, including
simplifying the design of products to reduce per-unit manufacturing
costs.
g) Lead the industry in Responsible Business practices
We are committed to leading our industry in responsible business
practices. Building on our strong Environmental, Social, and
Governance (ESG) credentials, our 'Powered by Kingfisher' strategy
sets out four priority areas for Responsible Business, where we can
maximise our positive impact on the lives of our customers,
colleagues, communities and the planet.
Our priorities are underpinned by our commitment to our
'Responsible Business Fundamentals'. These are the many issues and
impacts we need to measure and manage, to ensure we continue to
operate responsibly across our business. We have clear policies in
each of these areas, including health and safety, responsible
sourcing, cyber security and data protection, and ethical conduct,
to ensure we take a consistent best practice approach across our
banners.
Colleagues
Strong engagement to attract and retain colleagues
Our 80,000 colleagues are at the heart of our business and help
our customers make their home improvement plans a reality. As a
global business with colleagues in eight countries, we are proud of
our cultural diversity and believe this is a strength that is
fundamental to the way we operate.
We believe that highly motivated, engaged colleagues not only
give great service to our customers, but are also more likely to
stay and build their careers with us. We heard from more colleagues
in our engagement survey this year (83%, up 4% compared to last
year) and colleagues shared 317,000 comments (up 10%). Our Employee
Net Promoter Score (eNPS) is again significantly ahead of the
global retail benchmark (+6 points), putting us in the top 5% of
the global retail benchmark (compared to top 10% last year).
We invested to strengthen our employer brands, to ensure we can
attract and retain colleagues in increasingly competitive labour
markets, especially at store level. To recognise the contribution
of our frontline teams and to support colleagues with the cost of
living, our annual pay review process was focused on our store
colleagues, with more significant pay increases being awarded to
these colleagues. We have also broadened colleague benefits across
the Group, including employee discounts across a range of household
goods and services, and financial wellbeing support. As a result of
this and strong engagement across the Group, our attrition levels
and the time it takes to hire new employees are either in line
with, or ahead of, industry norms.
We continue to focus on diversity and inclusion because we know
it makes us a better business and a more innovative and engaged
workforce. We are listening to our colleagues and acting on the
ideas from our affinity networks about how we can build a more
inclusive culture. This summer, we responded to colleague feedback
and worked in partnership with our affinity networks to improve our
UK and France family leave policy and launched a new gender
expression and identity guide. We also launched a 'What dads can
do' campaign in Castorama Poland aimed at reminding fathers of the
benefits and support available to them. Colleagues across the group
celebrated PRIDE in June and Brico Dépôt Iberia focused on driving
awareness of safe spaces for the LGBTQ+ community via a campaign
which subverted typical health and safety signs with data about
LGBTQ+ discrimination.
We are also investing in inspiring opportunities for colleagues
to learn and grow with us. Colleagues completed nearly 600,000
hours of 'skills for life' learning during H1, bringing the total
number of hours completed since FY 19/20 to over 4.5 million.
We continue to invest in talent and capability to unlock further
growth. As part of our focus on creating new customer propositions,
we have recruited in key areas, in particular scaling digital,
technology and data. To support the growth of e-commerce sales, we
have established new marketplace capability through a combination
of specialist hires and targeted upskilling, and have expanded user
experience (UX) capability to further build online customer
experience. We have established a new highly skilled team brought
together from across the Group to lead Screwfix France as we scale
up in preparation for our first store openings. In parallel, we
continue to focus on head office efficiencies, ensuring we align
our resources to our strategic priorities.
Responsible Business priorities
We continue to make strong progress against our four Responsible
Business priorities:
Colleagues: Becoming a more inclusive company
-- In FY 21/22 we reached 25.2% women in senior leadership and
37.7% in management, an increase from 23.2% and 36.1% respectively
versus FY 20/21. We remain focused on meeting our targets of 35%
women in senior leadership and 40% in management, by FY 25/26.
-- Colleagues completed nearly 600,000 hours of 'skills for
life' learning during H1, bringing the total number of hours
completed since FY 19/20 to over 4.5 million, on track to meet our
target.
-- We had 3,890 apprentices across the Group in FY 21/22.
Planet: Helping to tackle climate change and create more forests
than we use
-- In July 2022, we announced a new target to reach net-zero for
our operations (scope 1 and 2) by the end of 2040. This means we
will reduce absolute emissions by at least 90% against our FY 16/17
baseline, and neutralise our residual emissions, in line with the
requirements of the Science Based Targets initiative (SBTi)
Corporate Net-Zero Standard.
-- Achieving our near-term 1.5degC aligned science-based scope 1
and 2 carbon reduction target (approved by the SBTi in 2021) is our
first step towards achieving net-zero carbon by FY 40/41.
-- In July 2022 we established a Group Climate Committee, with
the primary purpose to agree and monitor the Company's approach to
meeting its emission reduction commitments for 2025 and 2040; to
climate-related external reporting, and to assessing and managing
climate-related risks. The Committee is chaired by our Group
CEO.
-- We are a founding member of the UN's Race to Zero
Breakthroughs - Retail Campaign , a partnership aiming to inspire
more of the world's retailers to take action on climate change. In
FY 21/22, we reduced our carbon footprint for our own operations
(scope 1 and 2 emissions) by 24.5%, against a FY 16/17 base year.
This showed a strong underlying improvement over the previous two
years (FY 19/20: 18.5%). We remain on track to meet our 2025 target
of a 37.8% reduction.
-- Actions during H1 included further roll-out of LED lighting,
installing or retrofitting air source heat pumps into a further 65
Screwfix stores in the UK, and installing photovoltaic (PV) panels
and biomass boilers at selected locations. As of 31 July 2022, over
300 of Screwfix's 821 stores are heated with air source heat
pumps.
-- We buy electricity from zero carbon sources, supported by
Guarantee of Origin certificates. This now covers 100% of purchased
electricity for our operations in the UK, France, Poland, Iberia
and Romania.
-- Our 1.5degC 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. By the end of FY 21/22 we had reduced emissions from
energy-using products by 1.4 million tonnes of CO2e, versus FY
17/18. This takes account of a product's estimated lifetime carbon
emissions from energy use. This has reduced the intensity of our
emissions from the supply chain and customer use of products by
19.7%, meaning we are on track to meet our 2025 target of a 40%
reduction.
-- Kingfisher has a strong heritage in sustainable forestry and
the responsible sourcing of wood. In line with our commitment to be
'forest positive' by 2025:
- 87% of the wood and paper used in our products is responsibly
sourced (FY 20/21: 81%), including 100% of catalogue paper, putting
us on track to achieve our target of 100% by FY 25/26.
- As a founder member of the Rainforest Alliance's 'Forest
Allies' initiative, we continue to support forest projects in
Indonesia, Peru, Columbia, Guatemala and Cameroon, which will have
a positive impact on tropical forests and their communities,
including over 7,000 people and over 300,000 hectares of
forest.
Customers: Helping to make greener, healthier homes
affordable
-- In FY 21/22, GBP5.8bn of sales, representing 44% of Group
sales (FY 20/21: 42%), were from Sustainable Home Products (SHPs).
This equates to a doubling of our penetration since we established
the programme in FY 11/12.
-- These are products that either help our customers live more
sustainably (such as water-saving taps or loft insulation) or are
sustainable because of their input materials or how they are
manufactured (for example, FSC timber, peat-free compost or
recycled plastic).
-- In July we announced a new ambitious target for SHP sales to
reach 60% of Group sales by FY 25/26 (previous target 50% by FY
20/21). We are also targeting 70% of OEB product sales to be from
SHPs by FY 25/26 (FY 21/22: 55%).
-- Sustainability is one of the five core design principles we
use in developing our OEB ranges and we remain focused on improving
sustainability performance. For example, we lead the market in
moving towards 100% peat-free compost, we have removed solvents
from further paint lines, integrated recycled plastic into more
furniture and tools, and increased the longevity of some hand tool
ranges.
-- We also see considerable potential across all our markets as
the 'green homes' agenda accelerates, in particular in the UK and
France, where the governments have made 'net zero' commitments and
are exploring opportunities to further increase engagement with DIY
and trade customers on this agenda. For example:
- In FY 21/22, Kingfisher derived 10% of Group sales from energy
and water-saving products. We are very well placed in energy
efficiency categories such as loft insulation, LED lighting,
underfloor heating and electric radiators, and are exploring other
product solutions.
- Screwfix is selling photovoltaic (PV) panels and air-source
heat pumps to the trade and is exploring further options in this
market.
- In the coming weeks, B&Q will launch an innovative
end-to-end solution to help customers create a personalised energy
efficiency action plan for their homes, and then access the
relevant products and services via B&Q and its partners to take
action. Brico Dépôt France will also launch a similar solution in
the coming weeks.
- Following its launch in early 2021, Castorama France and Brico
Dépôt France have supported the French government's 'MaPrimeRénov'
grant scheme for energy-efficient projects in customers' homes. The
programme has gained significant traction in France.
Communities: Fighting to fix bad housing
-- In FY 21/22, we invested GBP4m in our communities, and our
colleagues and customers raised an additional GBP2.8m. We reached
over 800,000 people through our charitable partnerships and banner
Foundations.
-- This brings our total to over 1.5m people helped since FY
16/17, putting us on track to achieve our target to help 2m people
by FY 25/26.
-- We established charitable Foundations in all our banners and
extended our partnerships with the national charities, Shelter and
Macmillan in the UK, La Fondation Abbe Pierre in France, and
Habitat for Humanity in Poland and Romania.
-- Our banners supported a range of local projects during FY
21/22, such as the Bricobus run by Compagnons Bâtisseurs in France,
which reached 2,000 people in deprived rural regions with free DIY
training and advice, and Meta Pomoc in Poland, supporting young
people leaving the care system to improve their housing.
-- Kingfisher responded rapidly to the Ukraine crisis, with all
our retails banners actively fundraising and seeking donations
across their markets. We donated c.GBP0.5m to help organisations
such as the International Red Cross and the UNHCR with their relief
efforts. This included matched funding for colleague donations to
the Red Cross Ukraine Crisis Appeal.
-- In late August, torrential rains flooded Pakistan, impacting
around 33 million people. We have donated to the International Red
Cross Red Crescent Movement to support their humanitarian efforts.
The Pakistan Red Crescent is working hard to reach 300,000 people
with safe drinking water, tents, health support and other aid.
Governance and Reporting
Our Responsible Business Committee (RBC) is a sub-committee of
Kingfisher's Board. It supports the governance of Responsible
Business and monitors performance against our priorities. The RBC
is chaired by Sophie Gasperment, a non-executive director (NED) of
the Board, and includes a further NED, our Group CEO, and other
members of the Group Executive.
This year, we have integrated Responsible Business measures into
our long-term incentive plan (known as the Kingfisher Performance
Share Plan), which is granted to members of our senior leadership
team. The performance conditions attached to the vesting of awards
include 25% weighting on ESG measures. More information on this is
provided in our 2021/22 Annual Report and Accounts.
In May 2021, we entered into a new GBP550m sustainability-linked
revolving credit facility (RCF), which enables Kingfisher to
benefit from a lower interest rate when we deliver on ambitious
sustainability and community-based targets under the Group's
Responsible Business plan. Kingfisher achieved its FY 21/22
targets.
In July 2022 we published our FY 21/22 Responsible Business
Report aligned with the Sustainability Accounting Standards Board
(SASB) standards for Multiline and Speciality Retailers and
Distributors, and the Global Reporting Initiative (GRI).
Furthermore, we have been working to improve our understanding of
the financial impacts of climate-related risks and opportunities,
in line with the approach set out by the Task Force on
Climate-related Financial Disclosures (TCFD). Further information
is provided in our 2021/22 Annual Report and Accounts.
We continue to rank highly in external benchmarks and indices,
including:
-- MSCI: We rank as a 'Leader', having received the
highest-possible 'AAA' score, which was achieved by only 4% of
companies in the Retail - Consumer Discretionary sector.
-- CDP climate change: We continue to achieve a leadership score
of 'A-'. We are amongst 25% of companies in our sector globally
that reached 'Leadership' level and we score higher than the
average discretionary retail performance of 'B-'.
-- Sustainalytics: We rank first out of 39 in home improvement
retail and third out of 460 in the wider retailing industry.
-- Workforce Disclosure Initiative: We received a disclosure
score of 71%, which is ahead of the average consumer discretionary
sector and average disclosure score (all companies) of 68%.
-- ISS ESG Corporate Rating: We achieved a 'C+' rating. This is
supported by our 'Prime' status, which is given to companies that
are perceived to be sustainability leaders in their industry.
-- FTSE4Good: Kingfisher is included in this index, with a
rating of 4.6 out of 5 ('Strong' performance).
For more information on our Responsible Business strategy,
performance and governance, please visit the Responsible Business
section of our website at www.kingfisher.com . You can read our
2021/22 Responsible Business report here .
5. Clear financial priorities and capital allocation framework
Group financial priorities
Since September 2019, our 'Powered by Kingfisher' strategic plan
has delivered sales and profit growth, as well as over GBP900m of
returns to shareholders through dividends and share buybacks. We
are also making progress against our financial priorities over the
medium term. These are to:
-- Prioritise top line growth and grow sales ahead of market:
- Clear strategy, actions and investments to drive market share growth
- Focused on store and online customer satisfaction
- Operating in an attractive market, with new longer-term trends supporting the industry
-- Grow adjusted pre-tax profit in line with sales and gradually faster than sales over time:
- Focused on driving scale benefits and cost improvements,
enabling us to accelerate investment in top line growth and achieve
an improved adjusted pre-tax profit margin %* over time
-- Generate strong free cash flow to underpin investment and shareholder returns:
- Drive inventory self-help, which presents a significant opportunity over the medium term
- Disciplined approach to capital expenditure allocation, with
target gross capex of c.3.0-3.5% of total sales per annum, on
average
- Progressive, sustainable dividend policy, with target dividend cover* of 2.25-2.75x
- Committed to an efficient capital structure, while maintaining
a prudent position in times of uncertainty
- Scope for surplus capital returns via share buybacks or special dividends
Capital allocation
Last year, we updated our capital allocation policy to reflect
the investment requirements and ambition of 'Powered by
Kingfisher', while maintaining a strong balance sheet. The Group's
objectives in managing capital are to:
-- Invest in the business where economic returns are attractive
-- Maintain a solid investment grade credit rating
-- Safeguard the Group's ability to continue as a going concern
and retain financial flexibility
-- Provide attractive returns to shareholders
We allocate capital, subject to strict returns criteria, to
compelling organic or strategic/bolt-on inorganic growth
opportunities that strengthen and accelerate our strategy. Over
this and the next financial year, we expect to be towards the upper
end of the gross capex target range set out above, as we make
investments for growth.
To maintain a solid investment grade credit rating, our target
is a maximum of c.2.0 times net debt to EBITDA on an IFRS 16 basis,
over the medium term. To retain financial flexibility, we aim to
maintain strong liquidity headroom (including cash, cash
equivalents and committed debt facilities), which is currently set
at a minimum of GBP800m. Total liquidity as of 31 July 2022
includes an undrawn RCF of GBP550m and cash of GBP479m (net of bank
overdrafts).
In March 2021, the Board announced a target ordinary dividend
cover range of 2.25 to 2.75 times, based on adjusted basic earnings
per share. We aim to grow the ordinary dividend progressively over
time.
If surplus capital remains after having achieved all the above
objectives, the Board will periodically evaluate returning surplus
capital to shareholders via a share buyback programme or special
dividends.
Interim ordinary dividend
The Board has declared an interim dividend of 3.80 pence per
share, flat versus the H1 21/22 interim dividend of 3.80 pence per
share.
The interim dividend will be paid on 11 November 2022 to
shareholders on the register at close of business on 7 October
2022. A dividend reinvestment plan (DRIP) is available to
shareholders who would prefer to invest their dividends in the
Company's shares. The shares will go ex-dividend on 6 October 2022.
The last date for receipt of DRIP elections is 21 October 2022.
Additional GBP300m share buyback programme
In September 2021, the Board announced the return of GBP300m of
surplus capital via a share buyback programme. The programme
completed in April 2022.
In line with our capital allocation policy described above, in
May 2022 the Board determined that a further GBP300m of surplus
capital was available to return to shareholders, via a share
buyback programme. The first GBP75m tranche of this programme
completed in July, and the second GBP75m tranche is expected to
complete by next month.
Section 3: Trading review by division
Note: all commentary below is in constant currency.
UK & IRELAND
% Constant
Currency % LFL
GBPm 2022/23 2021/22 % Reported Change Change Change % 3-year LFL Change
B&Q 2,082 2,378 (12.5)% (12.4)% (13.0)% +16.7%
-------- -------- ------------------ ----------- -------- --------------------
Screwfix 1,139 1,192 (4.4)% (4.4)% (8.8)% +14.4%
-------- -------- ------------------ ----------- -------- --------------------
Total sales 3,221 3,570 (9.8)% (9.8)% (11.6)% +16.0%
-------- -------- ------------------ ----------- -------- --------------------
Retail profit 339 579 (41.3)% (41.3)%
-------- -------- ------------------ -----------
Retail profit margin % 10.5% 16.2% (570)bps (570)bps
-------- -------- ------------------ -----------
Kingfisher UK & Ireland sales decreased by 9.8% (LFL -11.6%)
to GBP3,221m, reflecting very strong prior year comparatives.
3-year LFL sales were up 16.0% in H1. The LFL sales trend improved
from -15.8% in Q1 to -7.1% in Q2, supported by resilient sales from
both DIY and DIFM/trade categories and benefiting from more
favourable weather. Our banners continued to improve their
competitive position in the UK home improvement market, and
engagement with new and existing customers remained strong, with
both store and online NPS improving on last year. Gross margin %
decreased by 200 basis points, reflecting 'normalised' promotional
activity versus the prior year, one-off logistics spend to secure
and manage seasonal and 'buffer' stock, and mix impacts. Mix
impacts are the result of a lower YoY share (versus Screwfix) of
B&Q's higher gross margin % revenues given very strong prior
year sales; unfavourable B&Q category mix between lower margin
building & joinery and EPHC (electricals, plumbing, heating
& cooling) and higher margin surface & décor categories,
and the success of the kitchen and bathroom & storage
categories that attracts higher fulfilment costs.
Retail profit decreased by 41.3% to GBP339m (H1 21/22: GBP579m;
H1 19/20: GBP279m), due to the exceptionally higher sales and gross
margin % in H1 last year. Operating costs increased by 3.9%,
reflecting higher costs associated with 88 net new store openings
(YoY), the normalisation of COVID-related underspend last year, and
operating cost inflation including higher utility charges. The
increase in operating costs was partially offset by lower staff
costs and cost reductions achieved as part of our strategic cost
reduction programme. Retail profit margin % decreased by 570 basis
points to 10.5% (H1 21/22: 16.2%; H1 19/20: 10.5%).
B&Q total sales decreased by 12.4% (LFL -13.0%) to GBP2,082m
as the business lapped very strong prior year comparatives. 3-year
LFL sales were up 16.7% in H1. The business has achieved good
growth across all categories on a 3-year basis, in particular
building & joinery and outdoor. In H1 B&Q saw resilient
sales in its kitchen and bathroom & storage categories, driven
by enhancements in the overall customer journey from design through
to installation. LFL sales of weather-related categories decreased
by 18% (increase of 23% on a 3-year LFL basis), while LFL sales of
non-weather-related categories, including showroom, decreased by
11% (increase of 14% on a 3-year LFL basis). B&Q's total
e-commerce sales (including marketplace gross sales) decreased by
17% YoY, largely reflecting strong online trading in the prior year
due to the COVID lockdowns in the UK. B&Q's total e-commerce
sales were up 149% on a 3-year basis, with e-commerce sales
penetration of 11% (H1 21/22: 11%; H1 19/20: 5%). B&Q's
marketplace has seen good growth since its launch in March,
reaching a penetration of 8% in August 2022 (i.e., B&Q's
marketplace gross sales divided by B&Q's total e-commerce
sales). B&Q opened one new compact store in H1, bringing its
total to 313 stores in the UK and Ireland.
B&Q's trade-focused banner, TradePoint , continues to
perform ahead of expectations as demand from trade customers
remains robust. The business remains a significant part of B&Q
at 21% of its sales (H1 21/22: 19%). LFL sales for TradePoint
outperformed the rest of B&Q, with LFL sales down just 3.1% in
H1 and 3-year LFL sales up 34%, as well as low single-digit growth
in Q2 despite strong comparatives. Over the last two years,
TradePoint has made significant enhancements to its customer
proposition, including the addition of more trade-specific product
ranges and services (for example, tool hire), trade-only deals and
campaigns, and enhancements to its loyalty programme. Strong
engagement with trade customers has continued in H1, with the
recruitment and retention of members remaining a key area of focus
for the business. TradePoint continues to increase awareness of its
digital offer through in-store advertising, and is on track to
launch a dedicated app in 2023.
Screwfix total sales decreased by 4.4% (LFL -8.8%) to GBP1,139m,
again reflecting very strong prior year comparatives. 3-year LFL
sales were up 14.4% in H1. Screwfix grew its market share in H1,
with resilient sales from trade customers throughout the period.
Its 3-year LFL performance decreased somewhat from Q1 to Q2, with
lower YoY DIY revenues linked to very strong demand in the prior
year. Screwfix's e-commerce sales decreased by 17% YoY, largely
reflecting strong online trading in the prior year due to the COVID
lockdowns in the UK. E-commerce sales were up 144% on a 3-year
basis, with e-commerce sales penetration of 60% (H1 21/22: 70%; H1
19/20: 32%). The business has significantly strengthened its
digital proposition, with its new mobile app (launched in February
2021) having been downloaded 2.6m times, with 30x faster search
results and 6% higher conversion versus the Screwfix website. The
app has enabled the rollout of Screwfix 'Sprint', the within
one-hour home delivery service, currently available from over 300
stores, covering c.45% of UK postcodes. Further roll-out is planned
in H2.
Space growth contributed c.4% to total sales. In H1, Screwfix
opened 31 new stores (including three in Ireland), bringing the
total to 821 as of 31 July 2022. The business is on track to reach
its goal of over 80 new stores this financial year, and more than
1,000 stores in the medium term in the UK & Ireland.
As part of its international expansion plans, Screwfix launched
as a pure-play online retailer in France in April 2021. Results
have been very encouraging, with strong web traffic and conversion
rates, and growing brand awareness across the country. The business
is making good progress with building a new supply chain, with its
first distribution centre now open, and a strong pipeline of local
and national vendors selected and onboarded. In addition, Screwfix
is on track to deliver a dedicated IT system for its operations in
France. The business expects to open its first stores in France
within a few weeks from now, with a meaningful step-up in roll-out
targeted in 2023. The results for Screwfix International are
captured in 'Other International' - see below for further
information.
FRANCE
% Constant
Currency % LFL
GBPm 2022/23 2021/22 % Reported Change Change Change % 3-year LFL Change
Castorama 1,207 1,237 (2.5)% (0.4)% (0.5)% +13.4%
-------- -------- ------------------ ----------- -------- --------------------
Brico Dépôt 1,118 1,200 (6.8)% (4.9)% (5.5)% +13.8%
-------- -------- ------------------ ----------- -------- --------------------
Total sales 2,325 2,437 (4.6)% (2.6)% (3.0)% +13.6%
-------- -------- ------------------ ----------- -------- --------------------
Retail profit 129 129 +0.3% +2.4%
-------- -------- ------------------ -----------
Retail profit margin % 5.6% 5.3% +30bps +30bps
-------- -------- ------------------ -----------
Kingfisher France sales decreased by 2.6% (LFL -3.0%) to GBP
2,325 m, reflecting resilient sales from both DIY and DIFM/trade
customers, despite strong prior year comparatives. 3-year LFL sales
were up 13.6% in H1. The LFL sales trend improved from -3.7% in Q1
to -2.3% in Q2, driven by an improving sales trend at Brico Dépôt.
We continued to improve our competitive position in the French home
improvement market. In H1 22/23, Kingfisher France outperformed the
market (based on Banque de France data), driven by the
outperformance of Castorama which grew three percentage points
ahead of the market. Gross margin % decreased by 30 basis points,
reflecting category mix impacts and 'normalised' promotional
activity versus the prior year, partially offset by lower logistics
costs. France will complete its distribution centre space
reductions this month, closing a further 8% of space and bringing
its cumulative reduction to a c.27% decrease in square metres
versus two years ago.
Retail profit increased by 2.4% to GBP129m (H1 21/22: GBP129m;
H1 19/20: GBP112m), with lower gross profit YoY more than offset by
lower operating costs. Operating costs decreased by 4.5% due to
lower staff costs (including the phasing of store staff
incentives), lower store property costs, and cost reductions
achieved as part of our strategic cost reduction programme. Retail
profit margin % improved 30 basis points to 5.6% (H1 21/22: 5.3%;
H1 19/20: 5.2%).
Castorama total sales decreased by 0.4% (LFL -0.5%) to GBP1,207
m , reflecting resilient sales despite strong prior year
comparatives. 3-year LFL sales were up 13.4% . The business has
achieved strong growth across its outdoor, building & joinery
and kitchen categories on a 3-year basis, with each growing by over
20%. In H1 Castorama saw positive YoY sales growth in its building
& joinery, kitchen, bathroom & storage and EPHC categories,
the latter driven by the unusual heatwave in July. LFL sales of
weather-related categories decreased by 2% (increase of 22% on a
3-year LFL basis), while LFL sales of non-weather-related
categories, including showroom, were flat YoY (increase of 11% on a
3-year LFL basis). Castorama's e-commerce sales decreased by 38%
YoY, largely reflecting strong online trading in the prior year due
to COVID-related restrictions in France (which led to some
temporary store and non-essential range closures throughout the
first quarter and part of the second quarter of 2021). Castorama's
e-commerce sales were up 226% on a 3-year basis, with e-commerce
sales penetration of 5% (H1 21/22: 8%; H1 19/20: 2%). Castorama
opened two new stores in H1, its first high street compact store
tests in Paris. Castorama now has 95 stores in total in France.
Brico Dépôt total sales decreased by 4.9% (LFL -5.5 % ) to
GBP1,118m, again reflecting resilient sales levels despite strong
prior year comparatives. 3-year LFL sales were up 13.8%. The
business has achieved strong growth across its outdoor and building
& joinery categories on a 3-year basis, with each growing by
over 25%. Brico Dépôt continues to drive increased customer
engagement and improved price perception, as the business focuses
on strengthening its discounter credentials and further
differentiating its ranges. Brico Dépôt's e-commerce sales
decreased by 34% YoY, again reflecting strong online trading in the
prior year. Brico Dépôt's e-commerce sales were up 138% on a 3-year
basis, with e-commerce sales penetration of 4% (H1 21/22: 6%; H1
19/20: 2%).
OTHER INTERNATIONAL
% Constant
% Reported Currency % LFL % 3-year
2022/23 2021/22 Change Change Change LFL Change
Sales (GBPm)
-------- -------- ---------------- ------------- -------- -----------
Poland 913 743 +22.9% +29.0% +25.9% +23.8%
-------- -------- ---------------- ------------- -------- -----------
Iberia 196 196 +0.2% +2.3% +2.3% +15.6%
-------- -------- ---------------- ------------- -------- -----------
Romania (+/-) 145 152 (4.4)% (1.8)% +8.9% +43.6%
-------- -------- ---------------- ------------- -------- -----------
Other (+/-+/-) 9 3 n/a n/a n/a n/a
-------- -------- ---------------- ------------- -------- -----------
Other
International 1,263 1,094 +15.4% +20.2% +19.5% +24.3%
-------- -------- ---------------- ------------- -------- -----------
Retail profit
(GBPm)
-------- -------- ---------------- -------------
Poland 94 58 +58.6% +66.4%
-------- -------- ---------------- -------------
Iberia 6 11 (41.9)% (40.7)%
-------- -------- ---------------- -------------
Romania (+/-) (4) (6) +25.3% +23.3%
-------- -------- ---------------- -------------
Other (+/-+/-) (13) (5) n/a n/a
-------- -------- ---------------- -------------
Turkey (50% JV) 4 1 n/a n/a
-------- -------- ---------------- -------------
Other
International 87 59 +43.7% +52.1%
-------- -------- ---------------- -------------
Retail profit
margin %
-------- -------- ---------------- -------------
Poland 10.3% 8.0% +230bps +230bps
-------- -------- ---------------- -------------
Other
International 6.8% 5.5% +130bps +140bps
-------- -------- ---------------- -------------
(+/-) Kingfisher's subsidiary in Romania has historically
prepared its financial statements to 31 December. In the prior year
(FY 21/22), Romania migrated to Kingfisher's financial reporting
calendar (year ended 31 January). Its sales and retail loss
presented in H1 21/22 therefore included one additional month of
results (July 2021) in order to facilitate the alignment to
Kingfisher's financial reporting calendar. Reported and constant
currency variances for Romania's retail loss are for February to
July 2022 (compared against January to July 2021), whilst LFL and
3-year LFL sales growth for Romania compares equivalent periods in
the current and prior years.
(+/-+/-) 'Other' consists of the consolidated results of
NeedHelp (acquired in November 2020), Screwfix International
(launched online in France in April 2021), and results from
franchise agreements.
Other International total sales increased by 20.2% (LFL +19.5%)
to GBP1,263m, with 3-year LFL sales up 24.3%, driven by growth in
all key geographies. Retail profit increased by 52% to GBP87m (H1
21/22: GBP59m; H1 19/20: GBP63m), with improved performances in
Poland, Romania and Turkey partially offset by a lower retail
profit in Iberia and losses incurred in 'Other' operations. The
retail profit margin % increased by 140 basis points to 6.8% (H1
21/22: 5.5%; H1 19/20: 5.3%).
Poland total sales increased by 29.0% (LFL +25.9%) to GBP913m,
supported by strong market share gains, notwithstanding weak prior
year comparatives in Q1 due to the COVID-related temporary closure
of all Castorama stores (between 27 March and 3 May 2021). 3-year
LFL sales were up 23.8% in H1. The business has achieved very
strong growth across all categories on a 3-year basis, with
building & joinery, kitchen and outdoor all growing by over
30%. The performance of the OEB kitchen range in Poland has
demonstrated Kingfisher's ability to capture a new market
opportunity with the right combination of offer, price and service,
delivering over 90% LFL sales growth in H1 on a 3-year basis and up
by over 60% YoY. LFL sales of weather-related categories increased
by 26% (increase of 33% on a 3-year LFL basis) while LFL sales of
non-weather-related categories, including showroom, increased by
26% (increase of 22% on a 3-year LFL basis). Poland's e-commerce
sales decreased by 3% YoY, impacted by the temporary store closures
in Q1 last year. Q2 e-commerce sales in Poland increased by 19%
YoY. Poland's e-commerce sales were up 330% on a 3-year basis, with
e-commerce sales penetration of 5% (H1 21/22: 7%; H1 19/20: 2%).
Gross margin % increased by 10 basis points, largely reflecting
favourable mix impacts (category and channel mix). Retail profit
increased by 66.4% to GBP94m (H1 21/22: GBP58m; H1 19/20: GBP81m)
with strong growth in gross profit partially offset by an increase
in operating costs. Operating costs increased by 18.1%, reflecting
space growth and new store opening costs, higher marketing costs,
staff and operating cost inflation, as well as reflecting the
reversal of one-off cost savings in H1 21/22 related to the period
of temporary store closures. The increase in operating costs was
partially offset by cost reductions achieved as part of our
strategic cost reduction programme. Retail profit margin %
increased by 230 basis points to 10.3% (H1 21/22: 8.0%; H1 19/20:
10.8%).
Space growth contributed c.3% to total sales. Castorama opened
three new stores in H1, including two big-boxes and one compact
store (a small retail park store concept test, trading under the
Castorama Smart banner), bringing its total to 93 stores in Poland.
In August, the business opened its first 500 sqm concept store in
Poland, in Warsaw, under the Castorama Express banner.
Iberia total sales increased by 2.3% (LFL +2.3%) to GBP196m,
reflecting resilient sales against strong prior year comparatives,
though impacted by abnormally cold and wet weather during Q1. LFL
sales growth improved in Q2 to +4.4%. 3-year LFL sales were up
15.6% in H1. The business has achieved strong growth in most of its
categories on a 3-year basis, with building & joinery, EPHC,
kitchen, surfaces & décor and outdoor all growing by
double-digit percentages. Retail profit decreased to GBP6m from
GBP11m (H1 19/20: GBP2m), reflecting a lower gross margin % and an
increase in operating costs of 2.0%.
Romania total sales decreased by 1.8% to GBP145m, reflecting the
inclusion of one additional month of sales in the prior year
comparative. On an LFL basis sales growth was +8.9%, reflecting
strong YoY performances in its building & joinery, kitchen,
surfaces & décor and outdoor categories. This was despite the
impact of COVID-related trading restrictions earlier in the year
(lifted in March 2022). Growth in gross profit was partially offset
by an increase in operating costs of 4.5%, mainly driven by staff
costs and inflation. As a result, the business reduced its retail
loss by 23.3% to GBP4m (H1 21/22: GBP6m retail loss; H1 19/20:
GBP12m retail loss). On a comparable basis, excluding losses
incurred in the month of January 2021, Romania's retail loss
increased by 3.6% YoY.
In Turkey , Kingfisher's 50 % joint venture, Koçta , continues
to grow successfully in a challenging economy. The business
contributed GBP4m of retail profit in the period (H1 21/22: GBP1m;
H1 19/20 GBP3m), benefiting from strong customer demand in H1,
partly due to the expectation of higher inflation. The business
recently opened its 300(th) store, on its way to a target of over
500 stores in 2023.
'Other' consists of the consolidated results of NeedHelp,
Screwfix International, and franchise agreements. Due to these
businesses being in their early investment phase, a combined retail
loss of GBP13m was incurred as they scale up for growth. In
November 2020, Kingfisher acquired NeedHelp, one of Europe's
leading home improvement services marketplaces. As noted in the UK
& Ireland commentary above, Screwfix launched in France as a
pure-play online retailer in April 2021 with very encouraging
results, and expects to open its first stores in France soon.
Earlier this year we opened our first franchise store under the
B&Q banner in the Middle East, with a further store opening in
May. The stores and support office functions are fully operated and
staffed by the Al-Futtaim Group.
RETAIL BANNER EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area(1)
(FTE) numbers at 31 July 2022 (000s m(2) )
at 31 July 2022 at 31 July 2022
B&Q 17,235 313 2,211
Screwfix 9,225 821 52
----------------------- ------------------- --------------------------- -------------------
UK & Ireland 26,460 1,134 2,263
Castorama 11,683 95 1,156
Brico Dépôt 8,636 123 862
----------------------- ------------------- --------------------------- -------------------
France 20,319 218 2,018
Poland 12,486 93 797
Iberia 2,038 31 195
Romania 2,724 35 253
Other(2) 96 - -
Other International 17,344 159 1,245
----------------------- ------------------- --------------------------- -------------------
Total 64,123 1,511 5,526
----------------------- ------------------- --------------------------- -------------------
(1) Screwfix sales area relates to the front of counter area of
an outlet.
(2) 'Other' consists of NeedHelp, Screwfix International, and
franchising.
Section 4: FY 2022/23 Technical guidance
New guidance, or significant updates to our previous guidance,
are noted below in italics.
Please refer to Section 7 for further details regarding
forward-looking statements.
Income statement
-- Space
- Net space growth to impact total sales by c.+1.5%, largely from Screwfix and Poland
-- Gross margin %
- In line with pre-pandemic level (FY 19/20: 37.0%)
-- New businesses
- 'Other' retail losses of c.GBP30m (FY 21/22: GBP10m) (previous
guidance c.GBP20m, with increase driven by accelerated investment
in Screwfix France). 'Other' consists of the consolidated results
of NeedHelp, Screwfix International, and franchise agreements,
recorded within the 'Other International' division
- Retail loss of c.GBP5m in relation to investment in B&Q's
e-commerce marketplace, recorded within the results of B&Q in
the 'UK & Ireland' division
-- Central costs
- Broadly flat YoY (FY 21/22: GBP60m)
-- Net finance costs
- Decrease by c.GBP20m mainly as a result of lower lease
liability interest rate (FY 21/22: GBP137m) (previous guidance
decrease by c.GBP15m)
-- Adjusted pre-tax profit
- Full year adjusted pre-tax profit(1) in the range of c.GBP730m
to GBP770m (previous guidance c.GBP770m)
-- Tax rate
- Group adjusted effective tax rate* of c.22%(2) (FY 21/22: 22%)
Balance sheet and cash flow
-- Inventory - anticipate reduction of stock levels in H2 22/23
related to sell-through of a large part of 'buffer' stock
previously held to protect product availability
-- Capital expenditure - targeting gross capex of c.3.5% of
total sales (FY 21/22: GBP397m; c.3.0% of total sales)
-- Tax - in February 2022, a payment of EUR40m (c.GBP34m) was
made to the French tax authorities with regards to a historic tax
liability. The amount was fully provided for in prior periods
-- Share buybacks - c.GBP325m outflow for share buybacks
(c.GBP145m for the first GBP300m programme completed in April, and
a further c.GBP180m related to the second GBP300m programme)
-- Dividends - c.GBP246m outflow for dividends (GBP172m related
to the FY 21/22 final dividend of 8.60p, and c.GBP74m related to
the FY 22/23 interim dividend of 3.80p). For the total dividend in
respect of FY 22/23, our dividend policy target cover range remains
2.25 to 2.75 times, based on adjusted basic earnings per share
(1) Guidance assumes current exchange rates
(2) Subject to the blend of profit within the Group's various
jurisdictions
Section 5: H1 2022/23 Financial review
A summary of the reported financial results for the six months
ended 31 July 2022 is set out below.
Financial summary % Total % Total % LFL
Change Change Change
--------- ---------- ----------
Constant Constant
2022/23 2021/22 Reported currency currency
--------------------------- ------------ ---------- --------- ---------- ----------
Sales GBP6,809m GBP7,101m (4.1)% (2.8)% (4.1)%
Gross profit GBP2,496m GBP2,697m (7.4)% (6.3)%
Gross margin % 36.7% 38.0% (130)bps (130)bps
Operating profit GBP531m GBP747m (29.1)%
Statutory pre-tax profit GBP474m GBP677m (30.0)%
Statutory post-tax profit GBP373m GBP556m (32.9)%
Statutory basic EPS 18.6p 26.4p (29.8)%
Net (decrease)/increase GBP(329)m GBP444m n/a
in cash(1)
Interim dividend 3.80p 3.80p -
Adjusted metrics
Retail profit GBP555m GBP767m (27.7)% (27.1)%
Retail profit margin
% 8.2% 10.8% (260)bps (270)bps
Adjusted pre-tax profit GBP472m GBP669m (29.5)%
Adjusted pre-tax profit
margin % 6.9% 9.4% (250)bps
Adjusted post-tax profit GBP368m GBP525m (29.7)%
Adjusted basic EPS 18.3p 24.9p (26.6)%
Free cash flow GBP104m GBP723m (85.6)%
Net debt(2) GBP(1,848)m GBP(908)m n/a
(1) Net (decrease)/increase in cash and cash equivalents and
bank overdrafts.
(2) Net debt includes c.GBP2.3bn lease liabilities under IFRS 16
in H1 22/23 (H1 21/22: c.GBP2.3bn).
Total sales decreased by 2.8% on a constant currency basis, to
GBP6,809m, reflecting resilient sales across both retail and trade
channels despite strong prior year comparatives. Sales were lower
in the UK & Ireland, France and Romania (the latter due to the
alignment to Kingfisher's financial reporting calendar last year),
partially offset by positive YoY sales growth in Poland and Iberia.
On a reported basis, which includes the impact of exchange rates,
total sales decreased by 4.1%.
LFL sales decreased by 4.1%, which excludes the sales impact
from a net increase in space of +1.3%, driven by store openings by
Screwfix in the UK & Ireland, and Castorama in Poland. During
H1, we opened 37 new stores (including 29 stores in the UK, three
in Ireland, two in France and three in Poland).
Gross margin % decreased by 130 basis points on a constant
currency basis, reflecting 'normalised' promotional activity versus
the prior year, one-off logistics spend to secure and manage
seasonal and 'buffer' stock, and mix impacts. Mix impacts are the
result of a lower YoY share (versus other banners) of B&Q's
higher gross margin % revenues given very strong prior year sales,
and unfavourable category mix between lower margin building &
joinery and EPHC (electricals, plumbing, heating & cooling) and
higher margin surface & décor categories. On a reported basis,
gross margin % also decreased by 130 basis points. Group gross
profit decreased by 6.3% in constant currency.
Reported retail profit decreased by 27.7 % including GBP 6m of
unfavourable foreign exchange movement on translating foreign
currency results into sterling. In constant currency, retail profit
decreased by 27.1 %, largely reflecting very strong prior year
comparatives in the UK & Ireland which was partially offset by
strong retail profit growth in Poland. Operating costs increased by
2.1% on a constant currency basis, largely reflecting higher costs
associated with space growth and new store openings, operating cost
inflation, and the reversal of one-off cost savings that were
achieved in H1 21/22 due to COVID-related restrictions in our
markets (e.g., advertising & marketing and travel costs). The
increase in operating costs was partially offset by lower staff
costs and cost reductions achieved as part of our strategic cost
reduction programme. The Group's retail profit margin % decreased
by 260 basis points to 8.2% ( H1 21/22: 10.8% ; H1 19/20:
7.6%).
Adjusted pre-tax profit down 29.5% to GBP472m (H1 21/22:
GBP669m; H1 19/20: GBP337m), reflecting lower retail profit,
partially offset by lower net finance costs largely as a result of
lease renewals and regears. Adjusted pre-tax profit margin %
decreased by 250 basis points to 6.9% (H1 21/22: 9.4%; H1 19/20:
5.6%).
Statutory pre-tax profit , which includes adjusting items,
decreased by 30.0% to GBP474m. This reflects lower operating
profit, partially offset by lower net finance costs.
A reconciliation from the adjusted basis to the statutory basis
for pre-tax profit is set out below:
2022/23 2021/22 Increase/ (decrease)
GBPm GBPm
---------------------------------------------------------- -------- -------- ---------------------
Retail profit (constant currency) 555 761 (27.1)%
Impact of exchange rates - 6 n/a
---------------------------------------------------------- -------- -------- ---------------------
Retail profit (reported) 555 767 (27.7)%
Central costs (26) (27) n/a
Share of interest and tax of joint ventures & associates - (1) n/a
Net finance costs (57) (70) n/a
---------------------------------------------------------- -------- -------- ---------------------
Adjusted pre-tax profit 472 669 (29.5)%
Adjusting items before tax 2 8 n/a
Statutory pre-tax profit 474 677 (30.0)%
---------------------------------------------------------- -------- -------- ---------------------
Net finance costs of GBP57m (H1 21/22: GBP70m) consist
principally of interest on IFRS 16 lease liabilities. Net finance
costs decreased due to lower interest on lease liabilities and debt
repayments.
Adjusting items after tax were a gain of GBP5m (H1 21/22: gain
of GBP31m), as detailed below:
2022/23 2021/22
GBPm GBPm
Gain/(charge) Gain/(charge)
------------------------------------------------------ --------------- ---------------
Release of France and other restructuring provisions 1 -
Release of France uncertain operating tax position - 7
Property gains 1 1
Adjusting items before tax 2 8
Prior year and other adjusting tax items 3 23
Adjusting items after tax 5 31
------------------------------------------------------ --------------- ---------------
Current year adjusting items include a GBP1m gain principally
arising due to savings on costs relating to legacy store closure
programmes in France, as compared with the original restructuring
provisions recognised.
A gain of GBP1m was recorded on the exit of one property in the
UK.
Prior year and other adjusting tax items relate principally to
the impact on deferred tax balances of the enacted future increase
in the UK tax rate. Refer to note 7 of the condensed financial
statements.
Taxation
The Group's adjusted effective tax rate (ETR) is sensitive to
the blend of tax rates and profits in the Group's various
jurisdictions. It is higher than the UK statutory rate because of
the amount of Group profit that is earned in higher tax
jurisdictions. The adjusted ETR, calculated on profit before
adjusting items, prior year tax adjustments and the impact of
future rate changes, is 22% (H1 21/22: 22%). The adjusted ETR is
consistent with the prior year rate with small increases relating
to the effective impact of permanent differences on lower profits
and the higher share of profits in France, offset by reductions for
the fall in French corporate income tax rate.
The statutory effective tax rate includes the impact of
adjusting items (including prior year tax items). The impact of
these result in a statutory effective tax rate of 21%.
Pre-tax Pre-tax
profit profit
GBPm Tax 2022/23 GBPm Tax 2021/22
GBPm % GBPm %
------------------------- --------- -------- ---------- -------- ------- ---------
Adjusted effective tax
rate 472 (104) 22% 669 (144) 22%
Adjusting items 2 3 8 23
------------------------- --------- -------- ---------- -------- ------- ---------
Statutory effective tax
rate 474 (101) 21% 677 (121) 18%
------------------------- --------- -------- ---------- -------- ------- ---------
On 8 June 2022, the General Court of the European Union
dismissed several of the appeals, including the UK Government's, to
annul the European Commission's 2019 state aid decision concerning
the UK's controlled foreign company tax rules. It is expected that
the decision of the General Court will be appealed to the European
Court of Justice.
In FY 21/22 Kingfisher paid GBP64m (including interest) to HM
Revenue & Customs in relation to the state aid decision. The
Group continues to recognise this amount as a non-current tax asset
based on its assessment that its appeal will ultimately be
successful. Refer to note 17 of the condensed financial
statements.
In February 2022, a payment of EUR40m (c.GBP34m) was made to the
French tax authorities relating to a historic tax liability. This
amount was fully provided for in prior periods.
The statutory tax rates applicable to this financial year and
the expected statutory tax rates for next year in our main
jurisdictions are as follows:
Statutory tax rate Statutory tax rate
2023/24 2022/23
-------- ------------------- -------------------
UK 24% 19%
France 26% 26%
Poland 19% 19%
-------- ------------------- -------------------
Adjusted basic earnings per share decreased by 26.6% to 18.3p
(H1 21/22: 24.9p) , which excludes the impact of adjusting items.
Basic earnings per share decreased by 29.8% to 18.6p (H1 21/22:
26.4p) as set out below:
2022/23 2021/22
Earnings(1) EPS Earnings(1) EPS
GBPm pence GBPm pence
------------------------------------------ -------------- -------- -------------- --------
Adjusted basic earnings per share 368 18.3 525 24.9
Adjusting items before tax 2 0.1 8 0.4
Prior year and other adjusting tax items 3 0.2 23 1.1
Basic earnings per share 373 18.6 556 26.4
------------------------------------------ -------------- -------- -------------- --------
(1) Earnings figures presented reconcile adjusted post-tax
profits to statutory post-tax profits.
Dividends
The Board has declared an interim dividend of 3.80 pence per
share, flat versus the H1 21/22 interim dividend of 3.80 pence per
share.
The interim dividend will be paid on 11 November 2022 to
shareholders on the register at close of business on 7 October
2022. A dividend reinvestment plan (DRIP) is available to
shareholders who would prefer to invest their dividends in the
Company's shares. The shares will go ex-dividend on 6 October 2022.
The last date for receipt of DRIP elections is 21 October 2022.
For further details on our dividend policy please refer to
'Clear financial priorities and capital allocation framework',
within Section 2.
Management of balance sheet and liquidity risk and financing
Management of cash and debt facilities
Kingfisher regularly reviews the level of cash and debt
facilities required to fund its activities. This involves preparing
a prudent cash flow forecast for the medium term, determining the
level of debt facilities required to fund the business, planning
for repayment of debt at its maturity, and identifying an
appropriate amount of headroom to provide a reserve against
unexpected outflows and/or unexpected impacts to cash inflows. To
retain financial flexibility, we aim to maintain strong liquidity
headroom (including cash and cash equivalents, and committed debt
facilities), which is currently set at a minimum of GBP800m.
Net debt to EBITDA
As of 31 July 2022, the Group had GBP1.8bn (H1 21/22: GBP0.9bn)
of net debt on its balance sheet including GBP2.3bn (H1 21/22:
GBP2.3bn) of total lease liabilities.
The ratio of the Group's net debt to EBITDA (on a last twelve
months' basis) was 1.3 times as of 31 July 2022 (1.0 times as of 31
January 2022) . At this level, the Group has the necessary
financial flexibility during this current period of heightened
uncertainty, whilst retaining an efficient cost of capital.
Over the medium term, the Group's objective is a target of a
maximum of c.2.0 times net debt to EBITDA. For further details
please refer to 'Clear financial priorities and capital allocation
framework', within Section 2.
Net debt to EBITDA is set out below:
2022/23 2021/22
Moving annual total Year end
GBPm GBPm
Retail profit 936 1,148
Central costs (59) (60)
Depreciation and amortisation 564 555
EBITDA 1,441 1,643
Net debt 1,848 1,572
------------------------------- --------------------- ----------
Net debt to EBITDA 1.3 1.0
------------------------------- --------------------- ----------
Credit ratings
Kingfisher holds a BBB credit rating with Fitch, (P) Baa2 rating
with Moody's, and a BBB rating with Standard and Poor's. The
Outlook is Stable across all three agencies.
Revolving credit facility
In May 2021 the Group entered into a new GBP550m three-year
revolving credit facility (RCF) agreement with a group of its
relationship banks, linked to sustainability and community-based
targets. In May 2022 the credit facility was extended by one year
and now expires in May 2025. As of 31 July 2022, this RCF was
undrawn.
Other borrowings
The Group repaid its EUR50m and GBP50m fixed term loans at
maturity in September 2021 and December 2021 respectively.
Covenants
The terms of the committed RCF require that the ratio of Group
operating profit (excluding adjusting items) to net interest
payable (excluding interest on IFRS 16 lease liabilities) must be
no less than 3:1 for the preceding 12 months as at the half and
full year-ends. As of 31 July 2022, Kingfisher's ratio was higher
than this requirement.
Total liquidity
As of 31 July 2022, the Group had access to over GBP1bn in total
liquidity, including cash and cash equivalents of GBP479m 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:
2022/23 2021/22
GBPm GBPm
Operating profit 531 747
Adjusting items (2) (8)
Operating profit (before adjusting items) 529 739
Other non-cash items(1) 295 295
Change in working capital (223) 157
Pensions and provisions (13) (13)
Net rent paid (223) (242)
----------------------------------------------- -------- --------
Operating cash flow 365 936
Net interest paid (2) (4)
Tax paid (75) (78)
Gross capital expenditure (184) (131)
Free cash flow 104 723
Ordinary dividends paid (172) (174)
Share buybacks (218) -
Share purchase for employee incentive schemes (9) (29)
French tax authority payment(2) (34) -
Other tax authority payment(3) - (64)
Disposal of assets and other(4) - (9)
Net cash flow* (329) 447
Opening net debt (1,572) (1,394)
Movements in lease liabilities 57 78
Other movement including foreign exchange (4) (39)
----------------------------------------------- -------- --------
Closing net debt (1,848) (908)
----------------------------------------------- -------- --------
(1) Includes principally depreciation and amortisation,
share-based compensation charge and pension operating cost.
(2) Payments made in relation to French tax authority settlement
(refer to the Taxation section above for further details).
(3) Payments made in relation to the EC state aid challenge
(refer to the Taxation section above for further details).
(4) Includes adjusting cash flow items, principally comprising
restructuring costs, offset by property disposals.
Operating profit (before adjusting items) was GBP210m lower than
last year, largely reflecting lower profits in the UK &
Ireland.
The working capital outflow of GBP223m was driven by an increase
in net inventory of GBP395m. The majority of this increase was
driven by inflation and store expansion, with the balance including
the Group's proactive rebuild of inventory levels to support
stronger product availability . Partially offsetting this was a
GBP172m increase in payables (net of increase in receivables of
GBP59m), largely reflecting the timing of inventory purchases and
higher VAT creditors.
Gross capital expenditure in H1 was GBP184m, increasing by 40%
(H1 21/22: GBP131m). Of this expenditure, 24% was invested in
refreshing, maintaining and adapting existing stores (including
renewable energy initiatives), 13% on new stores, 45% on technology
and digital development, 3% on range reviews and 15% on other areas
including supply chain investment.
Overall, free cash flow for H1 was GBP104m (H1 21/22:
GBP723m).
Net debt (including IFRS 16 lease liabilities) as of 31 July
2022 was GBP1,848m (H1 21/22: GBP908m).
A reconciliation of free cash flow and net cash flow to the
statutory net movement in cash and cash equivalents and bank
overdrafts is set out below:
2022/23 2021/22
GBPm GBPm
------------------------------------------------------ -------- --------
Free cash flow 104 723
Ordinary dividends paid (172) (174)
Share buybacks (218) -
Share purchase for employee incentive schemes (9) (29)
French tax authority payment(1) (34) -
Other tax authority payment(2) - (64)
Disposal of assets and other(3) - (9)
------------------------------------------------------ -------- --------
Net cash flow (329) 447
Repayment of bank loans - (3)
Net (decrease)/increase in cash and cash equivalents
and bank overdrafts (329) 444
------------------------------------------------------ -------- --------
(1) Payments made in relation to French tax authority settlement
(refer to the Taxation section above for further details).
(2) Payments made in relation to the EC state aid challenge
(refer to the Taxation section above for further details).
(3) Includes adjusting cash flow items, principally comprising
restructuring costs, offset by property disposals.
Pensions
As of 31 July 2022, the Group had a net surplus of GBP406m (H1
21/22: GBP361m net surplus, FY 22/23: GBP410m net surplus) in
relation to defined benefit pension arrangements, of which a
GBP542m surplus (GBP540m surplus as of 31 January 2022) was in
relation to the UK scheme. The net surplus has remained broadly
stable in the period, with a higher discount rate reducing scheme
liabilities, offset by asset losses. This accounting valuation is
sensitive to a number of assumptions and market rates which are
likely to fluctuate in the future. The UK scheme's triennial
funding valuation as of 31 March 2022 is ongoing. Refer to note 11
of the condensed financial statements.
Risks
The Group's principal risks and uncertainties have been reviewed
as part of our half year procedures, and there are no additions or
removals since the FY 21/22 year-end.
Over the last six months we have seen increased macroeconomic
uncertainty with discretionary spending coming under pressure
across our markets due to inflation and especially higher energy
prices. We continue to carefully monitor and manage the situation
to ensure our costs are well controlled and that we provide good
value for money to our customers.
The risk of 'Political Volatility' remains high due to the
ongoing war in Ukraine, global tensions with China and the need for
individual governments to react to the current economic challenges.
We assessed the specific risks resulting from the conflict in
Ukraine, including in the area of 'Cyber and Data Security', and
have taken specific actions to mitigate any impact. The risk of
'Contagious Diseases' has been retained. Most countries have
successfully adapted to living with COVID. Several elements of the
'Supply Chain Resilience' risk relating to the pandemic have
reduced, with lead times and service levels improving and less
congestion in ports. However, the virus is still prevalent as seen
with recent lockdowns in Chinese regions, and there is a continued
risk that a future variant is resistant to vaccines.
-- Our People: Our colleagues are critical to the successful
delivery of our 'Powered by Kingfisher' strategy. We have
rebalanced responsibilities between Group and banners to set the
right conditions for our individual banners to grow while
leveraging the Group's scale and expertise to meet customer needs.
Our accelerated investment programme requires an expansion of our
technical capabilities. More generally, the failure to attract,
retain and develop colleagues with the appropriate skills,
capabilities and diverse backgrounds, or to have adequate
succession plans, could impact our ability to meet our business
objectives.
-- Level and Impact of Change: Under our strategic plan, the
business is utilising its core strengths and commercial assets, and
'powering' its distinct retail banners to address the significant
growth opportunities that exist within the home improvement market.
We have high ambitions and are continuously improving our offer,
market positions, cost base and technology. In particular, we are
rolling out a Group-wide IT systems development programme. Where
relevant we may also consider complementary acquisitions,
partnerships and joint ventures to optimise our business activities
and support our strategy. Failure to properly prioritise activity
and manage change effectively could result in weaker than
anticipated sales growth, reduced operating margins or insufficient
cash being generated to meet our objectives.
-- Contagious Diseases: Over the past two and a half years,
Kingfisher has demonstrated its ability to navigate the challenging
operational impacts of the COVID pandemic, retaining good product
availability and operating safely. With the emergence of new
variants, the risk of a prolonged global health threat and
associated government restrictions remains, including the
'zero-COVID' policy in China, which could adversely affect our
operations and those of our partners and suppliers. This could
cause a significant reduction in footfall and consumer spending and
could negatively impact our ability to receive products from
affected suppliers. High levels of absence in either our workforce
or our suppliers could impact our ability to operate stores and
warehouses, deliver products or provide appropriate functional
support to our business. Such restrictions and/or reductions in
demand could adversely affect our financial results and the
financial condition of the Group.
-- Supply Chain Resilience: A resilient supply chain is key to
our business and the achievement of our strategic objectives. We
are dependent on complex global supply chains and fulfilment
solutions to deliver our products to our customers. We are also
reliant on the ability of our suppliers to respond quickly to
changes in demand. Major disruption to our supply chain could
result in reduced levels of product available for sale, with an
adverse financial and reputational impact.
-- Competition: Our competitors include both traditional
store-based and pure-play online retailers. The pandemic has
accelerated changes in the market, with a sharp rise in the use of
online marketplaces and an increase in the number of competitors in
the home improvement market. Competitors are also developing their
offers, including both direct-to-customer operations and the
services offered. Targeted actions or disruptive behaviour by
competitors could negatively impact our market share, the value of
our assets and our financial results.
-- Changing Customer Preferences: The pace of change remains
high, with a greater use of e-commerce solutions for click &
collect and home delivery. To make our products available to
customers where and when they want it, we have accelerated our
investment programme. This ensures we have innovative digital
channels supported by an agile and reliable infrastructure,
including technology and logistics capability, and an optimised
property portfolio with in-store services. Failure to identify new
trends and optimise our channels quickly enough could affect our
ability to stimulate spend and adversely impact the value of our
assets and our financial results.
-- Political and Market Volatility: Kingfisher operates in eight
countries across Europe and relies on a global supply base,
exposing us to both geopolitical uncertainty and local volatility.
Disruption could include government restrictions on mobility,
strikes, work stoppages and/or our ability to receive products from
affected countries. Market volatility has increased since the
pandemic began, resulting in increased energy prices, changing
customer behaviours and reduced consumer confidence. If governments
try to reduce their budget deficits through taxation, this will
create additional burdens on businesses. These impacts could
potentially disrupt the day-to-day operations of our business and
our ability to meet our strategic objectives.
-- Legal and Regulatory: The Group's operations are subject to a
broad range of regulatory requirements in the markets in which it
operates. A major corporate issue or crisis, a significant fraud or
material non-compliance with legislative or regulatory requirements
would impact our brands and reputation, could expose us to
significant fines or penalties and would require significant
management attention.
-- Cyber and Data Security: Cyber-attacks and security incidents
continue to increase and the retail sector has joined a number of
industry sectors as a target due to it becoming more data driven.
As we increase our digital presence and develop smart products and
services our risk profile will continue to change. Failure to
protect data, detect breaches, and respond accordingly would
negatively impact our operations, profitability and reputation.
-- Reputation and Trust: Our customers, colleagues, suppliers,
investors and the communities we source from and operate expect us
to conduct our business in a way that is responsible. One of the
many ways we strive to ensure this is through our publicly
communicated Responsible Business strategy and targets, covering
topics such as climate change, responsible sourcing and diversity
(for further details please refer to 'Lead the industry in
Responsible Business practices', within Section 2). Failure to
deliver on our obligations and commitments could undermine trust in
Kingfisher, damage our reputation and impact our ability to meet
our strategic objectives.
Further details of the Group risks and risk management process
can be found on pages 42 to 50 of the 2021/22 Annual Report and
Accounts.
Section 6: Glossary
Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures (APMs), also known
as non-GAAP measures, of historical or future financial
performance, position or cash flows other than those defined or
specified under International Financial Reporting Standards (IFRS).
These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those
used by other retailers. APMs should be considered in addition to,
and are not intended to be a substitute for, or superior to, IFRS
measurements.
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 a better 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.
--------------- ----------------------- ------------------------------------------------
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 e-commerce No direct Refer to definition Total e-commerce sales are first-party
sales (+/-) equivalent e-commerce sales plus marketplace
gross sales. References to digital
or e-commerce sales growth relates
to growth at constant currency.
It is used to measure the performance
of all e-commerce business (first-party
and third-party) across the Group.
--------------- ----------------------- ------------------------------------------------
EBITDA Profit 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.
--------------- ----------------------- ------------------------------------------------
FFVR No direct Included within FFVR (financing fair value remeasurements)
equivalent net finance costs is included within adjusting items
in note 6 of the (see definition above) and represent
condensed financial fair value fluctuations from financial
statements instruments.
--------------- ----------------------- ------------------------------------------------
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,
YoY sales growth for stores that
have been open for more than one
year. Stores temporarily closed
or otherwise impacted due to COVID
are also included. It is a measure
to reflect the Group's performance
on a comparable basis.
--------------- ----------------------- ------------------------------------------------
3-year LFL Sales Refer to definition 3-year LFL is calculated by compounding
the current and prior two periods'
LFL growth. For example, H1 22/23
LFL growth of 5%, H1 21/22 LFL
growth of 4%, and H1 20/21 LFL
growth of 3%, results in 3-year
LFL growth of 12.5%. Russia (sale
completed on 30 September 2020)
is excluded from Group and Other
International 3-year LFL calculations.
It is a measure of the Group's
performance on a comparable basis.
--------------- ----------------------- ------------------------------------------------
Marketplace 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 % represent
participation equivalent B&Q's marketplace gross sales as
% (+/-) a percentage of B&Q's total e-commerce
sales. It is used to track the
success of our marketplace strategy
and performance.
--------------- ----------------------- ------------------------------------------------
Net debt No direct 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
condensed financial term 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.
--------------- ----------------------- ------------------------------------------------
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.
--------------- ----------------------- ------------------------------------------------
ROCE No direct Refer to definition ROCE (return on capital employed)
equivalent is the post-tax retail profit less
central costs, excluding adjusting
items, divided by capital employed
excluding historic goodwill, net
cash and adjusting restructuring
provision. The measure provides
an indication of the ongoing returns
from the capital invested in the
business. Capital employed is calculated
as a two-point average. The calculation
excludes disposed businesses.
--------------- ----------------------- ------------------------------------------------
Same-store Inventory Refer to definition Same-store net inventory movement
net inventory represents the constant currency,
YoY change in net inventory before
the impact of store openings and
closures. Stores temporarily closed
or otherwise impacted due to COVID
are also included. It is a measure
to reflect the Group's inventory
management on a comparable basis.
--------------- ----------------------- ------------------------------------------------
(+/-) Indicates the inclusion of new APMs. The new APMs in the
table above have been introduced to track the performance and
success of our e-commerce businesses and digital products and
services.
Other Definitions
Banque de France data for DIY retail sales (non-seasonally
adjusted). Includes relocated and extended stores.
http://webstat.banque-france.fr/en/browse.do?node=5384326
'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). The sale of Russia was completed in
FY 20/21 (on 30 September 2020). 'Other' consists of the
consolidated results of NeedHelp (acquired in November 2020),
Screwfix International (launched online in France in April 2021),
and results from franchise agreements.
SKU (Stock Keeping Unit) is defined as the number of individual
variants of products sold or remaining in stock. It is a distinct
type of item for sale, such as a product and all attributes
associated with the item type that distinguish it from others.
These attributes could include, but are not limited to,
manufacturer, description, material, size, colour, packaging and
warranty terms.
UK & Ireland consists of B&Q in the UK & Ireland and
Screwfix in the UK & Ireland.
Section 7: Forward-looking statements
You are not to construe the content of this announcement as
investment, legal or tax advice and you should make your own
evaluation of the Company and the market. If you are in any doubt
about the contents of this announcement or the action you should
take, you should consult a person authorised under the Financial
Services and Markets Act 2000 (as amended) (or if you are a person
outside the UK, otherwise duly qualified in your jurisdiction).
This announcement has been prepared in relation to the financial
results for the six months ended 31 July 2022. The financial
information referenced in this announcement is not audited and does
not contain sufficient detail to allow a full understanding of the
results of the Group. Nothing in this announcement should be
construed as either an offer or invitation to sell or any offering
of securities or any invitation or inducement to any person to
underwrite, subscribe for or otherwise acquire securities in any
company within the Group or an invitation or inducement to engage
in investment activity under section 21 of the Financial Services
and Markets Act 2000 (as amended) (or, otherwise under any other
law, regulation or exchange rules in any other applicable
jurisdiction).
Certain information contained in this announcement may
constitute "forward-looking statements" (including within the
meaning of the safe harbour provisions of the United States Private
Securities Litigation Reform Act of 1995), which can be identified
by the use of terms such as "may", "will", "would", "could",
"should", "expect", "anticipate", "project", "estimate", "intend",
"continue", "target", "plan", "goal", "aim", forecast, or "believe"
(or the negatives thereof) or other variations thereon or
comparable terminology. These forward-looking statements are based
on currently available information and our current assumptions,
expectations and projections about future events. These
forward-looking statements include all matters that are not
historical facts and include statements which look forward in time
or statements regarding the Company's intentions, beliefs or
current expectations and those of our Officers, Directors and
employees concerning, amongst other things, the Company's results
of operations, financial condition, changes in global or regional
trade conditions (including a downturn in the retail or
financial
services industries), competitive influences, changes in tax
rates, exchange rates or interest rates, changes to customer
preferences, the state of the housing and home improvement markets,
share repurchases and dividends, capital expenditure and capital
allocation, liquidity, prospects, growth and strategies, litigation
or other proceedings to which we are subject, acts of war or
terrorism worldwide, work stoppages, slowdowns or strikes, public
health crises, outbreaks of contagious disease (including but not
limited to the COVID pandemic), environmental disruption or
political volatility. By their nature, forward-looking statements
are not guarantees of future performance and are subject to future
events, risks and uncertainties - many of which are beyond our
control, dependent on actions of third parties, or currently
unknown to us - as well as potentially inaccurate assumptions that
could cause actual events or results or actual performance of the
Group to differ materially from those reflected or contemplated in
such forward-looking statements. For further information regarding
risks to Kingfisher's business, please consult the risk management
section of the Company's Annual Report (as published). No
representation, warranty or other assurance is made as to the
achievement or reasonableness of, and no reliance should be placed
on, such forward-looking statements.
The forward-looking statements contained in this announcement
speak only as of the date of this announcement and the Company does
not undertake any obligation to update or revise any
forward-looking statement to reflect any new information, change in
circumstances, or change in the Company's expectations to reflect
events or circumstances after the date of this announcement or to
reflect the occurrence of unanticipated events.
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END
IR GZGMLNLMGZZM
(END) Dow Jones Newswires
September 20, 2022 02:00 ET (06:00 GMT)
Kingfisher (LSE:KGF)
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