TIDMKGF
RNS Number : 1624Q
Kingfisher PLC
17 June 2020
Final results for year ended 31 January 2020
Financial summary % Total % Total % LFL*
Change Change Change
--------- ----------- ----------
2019/20 2018/19(1) Reported Constant Constant
currency* currency
-------------------------- ----------- ----------- --------- ----------- ----------
Sales* GBP11,513m GBP11,685m (1.5)% (0.8)% (1.5)%
GBP 4,255
Gross profit m GBP4,318m (1.4)% (0.8)%
Gross margin %* 37.0% 37.0% - -
Statutory pre-tax
profit GBP103m GBP300m (65.7)%
Statutory post-tax
profit GBP 8m GBP193m (95.9)%
Statutory basic EPS 0.4p 9.1 p (95.6)%
Interim dividend 3.33p 3.33p -
Final dividend - 7.49p n/a
Adjusted metrics
Retail profit*(2) GBP786m GBP824m (4.6)% (3.9)%
Retail profit margin
%* 6.8% 7.1% (30)bps (20)bps
Adjusted pre-tax
profit* GBP544m GBP574m (5.2)%
Adjusted effective
tax rate* 26% 27%
Adjusted post-tax
profit* GBP400m GBP421m (5.0)%
Adjusted basic EPS* 19.1p 19.8p (3.5)%
ROCE* 8.6% 8.6% -
Free cash flow* GBP191m GBP372m (48.7)%
Net cash (excluding GBP37m GBP84m n/a
IFRS 16 lease
liabilities)
Net debt*(3) GBP2,526m GBP2,542m n/a
FY 19/20 Group results (4)
-- Sales down 0.8% in constant currency
-- LFL sales down 1.5% with growth at Screwfix, Poland and
Romania offset by weaker sales at B&Q, France*, Russia and
Iberia*
- Improved LFL sales trend in all retail banners in Q4 19/20; LFL up 1.7%
-- Group gross margin % after clearance flat, in line with guidance
- Benefits from Group buying and sourcing largely offset by
incremental clearance and logistics & stock inefficiencies in
France
-- Underlying PBT (adjusted PBT before transformation costs) no
longer reported; transformation costs reallocated to retail profit
and central costs*
-- Adjusted PBT down 5.2%, in line with sales performance
-- Statutory PBT down 65.7% after GBP441 million of exceptional
items*, largely reflecting store and Russia impairments
-- Net debt to EBITDA * of 2.0x as at year-end; at lower end of
2.0-2.5x medium term target range
-- As previously announced, no FY 19/20 final dividend proposed given COVID-related uncertainty
FY 20/21 commentary
-- Q1 20/21 Group LFL sales down 24.8%
- Trading up to 14 March continued the positive trends seen in Q4 19/20
- Balance of quarter saw significant impact from COVID-related disruption
-- Q2 20/21 Group LFL sales up 21.8% (to 13 June 2020)
- Strong e-commerce* growth (up to fourfold growth since mid-March),
- Phased reopening of stores in the UK and France from mid-April, and
- Improving relative sales trend (Group LFL sales moved from
-74.0% in first week of April to more than +25% since second week
of May)
-- Financial impact being managed through significant cost and cash flow measures
-- No specific guidance provided for FY 20/21 given the uncertainty around COVID-19
Strategy update
-- Group executive team complete including eight new appointments
-- Initial focus on: improving operations in France,
implementing new trading approaches, recalibrating balance between
Group and local activities, enabling efficient store picking for
click & collect and home delivery, and pausing or stopping some
initiatives to focus our resources
-- Encouraged by Q4 19/20 and early FY 20/21 LFL sales performance
-- New 'Powered by Kingfisher' strategic plan: distinct retail
banners addressing diverse customer needs, 'powered' by the
Group
-- Key strategic priorities:
1) 'Focus and fix' in 2020, as set out in first two bullets
above, including managing the impact of COVID-19 on the
business
2) Move to a balanced, simpler local-group operating model with an agile culture
3) Grow e-commerce sales
4) Build a mobile-first, service orientated customer experience
5) Differentiate and grow through own exclusive brands (OEB)
6) Test new store concepts and adapt our store footprint
7) Source and buy better, reduce our costs and our inventory
8) Lead the industry in Responsible Business practices
Managing the impact of COVID-19
-- Committed to supporting communities and governments, ensuring
the health and safety of our colleagues, serving customers as a
retailer of essential goods, and protecting our business for the
long term
-- Over GBP2.5 million of PPE donated to frontline health workers
-- Took the decision initially to close in-store trading in UK
and France while establishing stringent safety and social
distancing protocols for colleagues and customers
-- Quickly adapted our operating model to help meet customers'
essential needs safely, initially through contactless click &
collect and home delivery, and then through phased store
reopenings
-- Access to over GBP3 billion of cash resources as at 12 June
2020, including c.GBP2 billion of cash at bank, providing
significant liquidity headroom
Thierry Garnier, Chief Executive Officer, said:
"Throughout the COVID-19 crisis, our priorities have been clear
- to provide support to the communities in which we operate, to
look after our colleagues as a responsible employer, to serve our
customers as a retailer of essential goods, and to protect our
business for the long term.
"At Kingfisher, we are both proud of, and inspired by, the way
in which our teams responded to the immense challenges of the last
few months. When the various lockdowns began, we rapidly
transformed our operations to meet a sharp increase in e-commerce,
while adapting our retail space and processes to ensure a safe
reopening of stores. In doing so, the social distancing and other
health & safety protocols we established have contributed to
setting the standard in non-food retailing. We have donated over
GBP2.5 million of PPE to frontline health workers, in line with our
commitment to responsible business practices. We have also taken
significant actions on costs and cash management that give us a
strong financial footing through the crisis and beyond.
"On joining the business in late September 2019 my priorities
were to build the executive team, stabilise our operational
performance and prepare a new plan. We have a strong new team in
place. We ended FY 19/20 in better shape, after a disappointing
first nine months, by returning the Group to positive like-for-like
sales growth in Q4 as well as for the start of FY 20/21.
"While the coronavirus crisis has obviously shifted our
immediate priorities, we have continued to plan for the longer term
and implement our new strategic plan. It would be a mistake not to.
Kingfisher is well positioned within a home improvement market that
is resilient and has attractive long term growth prospects. We have
strong market positions and distinctly positioned retail banners
that address diverse customer needs. These are major strengths in a
world that is so volatile and uncertain.
"Our clear intent is to become a more digital and service
orientated company, using our strong store assets as a platform. We
will continue to develop our own exclusive brands as a
differentiator, cater for diverse local customer needs, and each
retail banner will have its own positioning and plan. We will
'power' these banners as a Group. This is our new strategic
direction, 'Powered by Kingfisher'.
"The coronavirus crisis has provided us with the most unexpected
test of these plans, while really pushing our capabilities as a
business. The results have reinforced our strategic direction,
demonstrated how our operations and teams can be agile, and pushed
us to be bolder. Together, we look to the future with confidence
and are committed to returning Kingfisher to growth."
The remainder of this release is broken down into seven main
sections:
1) Group update (including new ' Powered by Kingfisher' strategic plan)
2) Managing the impact of COVID-19
3) Adoption of IFRS 16 and reallocation of costs
4) Trading review by division
5) FY 19/20 financial review and, in part 2 of this
announcement, the condensed financial statements
6) Glossary
7) Forward-looking statements
Footnotes
(1) FY 18/19 comparatives have been restated for IFRS 16
'Leases'. Refer to note 13 of the full year condensed financial
statements (in part 2 of this announcement) for detailed
restatement tables and associated commentary
(2) FY 18/19 retail profit restated to reflect the reallocation
of transformation P&L costs to country retail profits. There is
no impact on operating profit. Refer to Section 3 of this
announcement
(3) Net debt includes GBP 2.6 billion lease liabilities under
IFRS 16 in FY 19/20 (FY 18/19: GBP2.6 billion)
(4) Q4 19/20 sales, FY 19/20 sales and net debt figures as
previously announced on 23 March 2020
* Throughout this release '*' indicates the first instance of a
term defined and explained in the Glossary (Section 6). Not all the
figures and ratios used are readily available from the unaudited
final results included in part 2 of this announcement. Management
believe that these non-GAAP measures (also known as alternative
performance measures), including adjusted profit measures, constant
currency and like-for-like sales growth, are useful and necessary
to better understand 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
Final results announcement
The announcement can be downloaded from www.kingfisher.com . We
can be followed on Twitter @kingfisherplc with the full year
results tag #KGFFY.
Results presentation
We will host an online results presentation and Q&A today,
at 09.15 (UK time), for analysts and investors. A live audio
webcast of the presentation and Q&A will be available via the
Investors section of our website at www.kingfisher.com , and
subsequently available on demand. To join via telephone please use
the password already sent to you, or email
investorenquiries@kingfisher.com . The presentation slides will be
available on our website at 09.15 (UK time).
Financial calendar
Annual General Meeting 24 July 2020
Half year results 22 September 2020(+/-)
Q3 results 19 November 2020(+/-)
(+/-) These dates are provisional and may be subject to
change
American Depository Receipts
Kingfisher American Depository Receipts are traded in the US on
the OTCQX platform: (OTCQX: KGFHY)
http://www.otcmarkets.com/stock/KGFHY/quote .
Section 1: Group update (including new ' Powered by Kingfisher'
strategic plan)
Overview
Our markets are growing and changing
The home improvement market is attractive with consumers
remaining passionate about improving their homes. Long-term market
drivers are healthy due to population growth, urbanisation and an
ageing housing stock, and we expect our core markets to grow. There
are also clear shifts within the market which provide us with
opportunities, some of which are rapid such as online growth, and
some of which are gradual such as smaller format stores,
discounters and the growth of DIFM ('do it for me'). Kingfisher's
strategy must address these, including the acceleration of online
shopping (but with stores at the centre) and a shift to smaller
format stores. Customers also expect a seamless and convenient
shopping experience, high quality products, excellent value for
money, and expertise and services to help them realise their
projects.
We have leading and distinct retail banners
Our retail banners occupy number one or two positions in our key
home improvement markets of the UK, France and Poland, with over
90% brand awareness. Each banner is distinctly positioned and
together they address diverse customer needs, and have distinct
operating models. Some are focused on trade (Screwfix, TradePoint
at B&Q), others address more general DIY needs (B&Q,
Castorama France, Castorama Poland, Brico Dépôt Romania, Koçta ),
while Brico Dépôt France and Brico Dépôt Iberia are positioned as
discounters. This differentiation is a major strength, especially
in a world that is volatile and uncertain .
We have operational strength and flexibility
Kingfisher has many strengths today, underpinned by experienced
and skilled colleagues, a strong focus on responsible business
practices and the financial scale of the combined Kingfisher
Group.
Kingfisher is a multiformat retailer with over 1,350 stores.
Approximately 40% of our total store estate by space is freehold
which provides operational and financial flexibility. In addition,
our leased stores have relatively short lease lengths providing
flexibility as we test new concepts and reshape our footprint to
reflect the increasing customer need for convenience and
immediacy.
Four years of established Group capabilities
Over the last four years Kingfisher has leveraged its collective
buying and sourcing scale (c.GBP7 billion of COGS) to drive buying
efficiencies and cost price reduction. Our price positioning has
improved at Castorama France and B&Q. In addition, own
exclusive brands (OEB) have been developed to differentiate us from
our competitors and drive sales and gross margin growth, which has
been evident in several categories. We have established a common
SAP platform to support operational efficiency. The business has
also achieved over GBP100 million of savings from Goods Not for
Resale (GNFR*) and operating efficiency initiatives, and
established a shared services centre in Poland.
We have become overly complex and lost customer focus and
sales
However, our operating model had become overly complex. The
Kingfisher Group took on too many responsibilities, the business
became overly product-led instead of retail-led, and we tried to do
too much with multiple large-scale initiatives running in parallel.
Altogether, this resulted in a lack of agility in meeting customer
needs (some of which are shared, some of which are very different
across our retail banners) and caused disruption to sales. Much of
the financial benefit from leveraging Kingfisher's collective scale
has been offset by additional costs, clearance, and logistics and
stock inefficiencies. While some of our banners have delivered
growth over the last four years (notably Screwfix and Poland), in
other markets such as France, our performance has been
disappointing. Group sales and retail profit need to improve.
'Powered by Kingfisher' - Committed to returning the business to
growth
Under our new strategic plan, 'Powered by Kingfisher', we will
utilise our core strengths and commercial assets, and 'power' our
distinct retail banners in order to address the significant growth
opportunities that exist within the home improvement market,
returning the business to growth. To serve customers effectively
today, we also need to be digital and service orientated, while
leveraging our strong store assets.
Our priorities under the new strategic plan: 'Powered by
Kingfisher'
Our key strategic priorities under 'Powered by Kingfisher' are
as follows:
1) 'Focus and fix' in 2020 (including managing the impact of COVID-19 on the business)
2) Move to a balanced, simpler local-group operating model with an agile culture
3) Grow e-commerce sales
4) Build a mobile-first, service orientated customer experience
5) Differentiate and grow through own exclusive brands (OEB)
6) Test new store concepts and adapt our store footprint
7) Source and buy better, reduce our costs and our inventory
8) Lead the industry in Responsible Business practices
Following the appointment of Thierry Garnier as CEO in late
September 2019 the business identified a number of immediate
priorities ('Focus and fix' in 2020) for the Group, starting with
building the new Group Executive team. These priorities are
detailed below and underpin the implementation of our new strategic
plan .
Our medium term priorities under the new plan are also detailed
below (numbers 2 to 8), centred around empowering our distinct
retail banners and simplifying Kingfisher's operating model,
embracing digital and own exclusive brands, and returning the
business to growth. In 2020, the outbreak of COVID-19 rapidly
became the most critical issue facing our business. Managing the
impact on our business is therefore our top priority. As a result
of this, we are continuing to keep the timing of investments under
review in some of the medium term priorities detailed in numbers 2
to 8 below, based on the needs of the business.
1. 'Focus and fix' in 2020
Managing the impact of COVID-19: We are committed to supporting
communities and governments in managing the COVID-19 pandemic.
Equally, we are focused on making sure that we can continue to
serve our customers' essential needs safely and as effectively as
possible, while fulfilling our obligations as a responsible
employer to protect the safety of colleagues. From the start of the
outbreak, we have taken measures to protect our colleagues and
customers, to limit the impact on profitability and to preserve
financial flexibility (see Section 2 below).
Build the new Group Executive team: Since the appointment of
Thierry Garnier as CEO in late September 2019, we have rebuilt the
Group Executive team including seven additional appointments. We
now have an experienced team with a strong mix of functional
expertise as well as experience from Kingfisher, other home
improvement companies and the broader retail and service
industries.
Kingfisher's Group Executive team
Thierry Garnier(+/-) Chief Executive Officer
Functional
Bernard Bot(+/-) Chief Financial Officer
Martin Lee(+/-) Chief Supply Chain Officer
Kate Seljeflot(+/-) Chief People Officer
Henri Solère Chief Offer and Sourcing Officer
Jean-Jacques Van Oosten(+/-) Chief Customer and Digital Officer
Chief Transformation and Development
John Wartig(+/-) Officer
Operating companies
Graham Bell CEO B&Q UK and Ireland
Sebastien Krysiak CEO Poland
John Mewett CEO Screwfix
Alain Rabec(+/-) CEO France
Adela Smeu(+/-) CEO Romania
----------------------------- -------------------------------------
(+/-) Recent appointments to the Group Executive
Operational improvements in France: As outlined at H1 19/20 we
have been working on initiatives both at Group and local level to
improve Castorama France's IT platform, and the effectiveness of
its operational processes and fulfilment function. We have paused
the further rollout of the unified IT platform at Brico Dépôt to
prioritise improvements at Castorama France. In addition the supply
chain and logistics team in France has been reorganised, including
the recruitment of several key new people within the team. The team
now has more local autonomy to manage the business needs and
requirements of the French banners. Whilst there is still much to
do, not least our ongoing response to the coronavirus crisis as
noted above, the overall performance of our supply chain and
logistics operations in France is improving. In Q4 19/20 this
resulted in better stock availability, a significant reduction in
slow-moving stock, an improved customer experience and, according
to Banque de France* data, a narrowing of our sales performance
versus the market (as compared to the margin of underperformance
versus the market in the first nine months of FY 19/20). Alain
Rabec, a highly experienced retailer, was appointed CEO of France
in late September 2019, and is driving our initiatives to improve
both operational performance and our long-term customer
propositions for Castorama and Brico Dépôt.
Implement our new trading approach: We have established a
commitment to address the diversity of our customers' needs, and
offer consistently excellent value for money. In Q4 19/20 we
trialled a series of promotion-based trading events in our major
retail banners, and commenced targeted price investments at
Screwfix. We were pleased with the customer response, helping to
drive a better like-for-like sales performance in Q4 19/20 and
re-engage with our customers. We will continue to give our banners
freedom to engage with customers and drive sales. In addition, we
recognise that expertise and services are important for some
customers and are in the process of trialling or relaunching new
service propositions in all our banners, including showroom
installations at B&Q.
Rebalancing local vs Group responsibilities: We are establishing
the right balance between Kingfisher Group and local levels, with
the overall aim of enabling our retail banners to have flexibility
and agility to address specific needs in local markets.
Enabling e-commerce from stores: In leading e-commerce markets,
stores are back at the centre of the e-commerce proposition. Stores
provide support for the significant proportion of retail online
orders picked in stores and fulfilled through click & collect,
in-person returns, and fast delivery. Kingfisher, with over 1,350
stores, is therefore very well positioned to address the clear
e-commerce opportunity. This area of focus supports the broader
e-commerce priority described in detail below and, through
necessity, has been successfully accelerated by the onset of the
coronavirus crisis.
Pause or stop some initiatives: To ensure greater customer
focus, from October 2019 we started to pause or stop several
Group-wide initiatives. For example, we significantly reduced the
level of planned range change for FY 20/21, based on our
prioritisation of customer needs. Subject to ongoing demand
planning during the coronavirus crisis, we plan to continue rolling
out our new kitchen ranges in due course, completing the
implementation at B&Q and commencing in France and Poland.
However, non-critical range changes have been stopped. Similarly,
we have stopped non-critical IT projects, and paused certain
elements of our global SAP rollout (for example, at Brico Dépôt
France), while we prioritise Castorama France.
In November 2018, Kingfisher announced the decision to exit
Russia and Iberia. In relation to Russia, whilst there has been
some disruption to the exit process from the coronavirus crisis, we
continue to make progress and discussions with several interested
parties are ongoing. In relation to Iberia, whilst there has been
interest in the business, we have reviewed the original decision to
exit Iberia and believe we can build a profitable, sustainable
business under the Brico Dépôt banner. In normal business
conditions, the business is profitable and not a burden on group
resources (capital or management).
Accelerate cost reduction: Due to the significant number of
change initiatives over the last four years as well as our complex
organisational structure, Kingfisher's overhead cost base has
become too high, both in absolute terms and relative to Group
sales. We believe that there are significant cost reduction
opportunities across Kingfisher, many of which are noted in the
medium-term priorities described below. The coronavirus crisis has
underscored the need to accelerate our plans in this area and
address the opportunity to become simpler, leaner and more
agile.
2. Move to a balanced, simpler local-group operating model with an agile culture
We believe that striking the right balance between Group and
local responsibilities sets the right conditions for our distinct
retail banners to thrive. This will enable them to continue
leveraging the Group's scale and expertise to meet customer needs
that are similar across markets, whilst allowing them to focus on
those needs that are different. This includes establishing stronger
feedback loops for range-building, as well as individual trading
plans. Initial steps have been taken to move towards this operating
model, as evidenced within our Q4 19/20 results and in FY 20/21 to
date. Moreover, the agility and rapid progress demonstrated by
Kingfisher during the coronavirus crisis is testament to the move
towards this approach, supported by a Group-wide culture of focus,
intensity and 'done is better than perfect'.
Our conviction is that each of our retail banners addresses the
often different needs of customers. Each banner has a
differentiated business model, and by respecting these differences
we will maximise their potential. Each banner needs the right
product range, its own commercial approach, and services that meet
their customers' needs. The development of banner-specific plans is
ongoing, including a strong focus on ensuring we maximise the
growth opportunity at Screwfix and re-establish a strong customer
proposition in Castorama France.
Kingfisher's scale, used intelligently, is an important source
of competitive advantage. Kingfisher has well-established Group
capabilities in own exclusive brand (OEB) development, buying and
sourcing, technology, and shared services. However, as described
above, Kingfisher's organisation is too complex. It needs to be
simpler, leaner, more agile, open to partnerships, and even more
customer-focused. We will continue to adapt the operating model so
that Group functions are set up efficiently to 'power' growth in
our retail banners, providing:
-- Differentiated own exclusive brands (OEB) , which are innovative and provide a key source of differentiation
-- Sourcing & buying , delivering lower cost prices across all products (OEB and brands)
-- Technology & partnerships , providing all our banners
with access to the best technologies and complementary
partnerships
-- Shared services and lower cost functions
-- Centres of excellence , to set strategy and targets, to share
knowledge and best practices, to support implementation, and to
help steer progress. Centres of excellence include
e -commerce, digital journey, data, store concepts, services and
service platforms, and supply chain
-- Culture & values , providing a framework for our core
behaviours, values, and industry-leading responsible business
practices
3. Grow e-commerce sales
Over the past five years, the home improvement industry has seen
an acceleration of online shopping and consumption. However, this
industry has more defences against online pure players than many
other retail segments. Visualisation and inspiration, the need for
advice, immediate access to product (especially for trade
customers) and often complex and expensive delivery requirements
mean that penetration varies by product category. As a result,
there is a higher online propensity in categories such as tools,
electricals, plumbing, heating and cooling, and garden/outdoors,
but a lower propensity in categories such as kitchens, bathrooms,
construction and paint.
As noted above, stores are back at the centre of the e-commerce
proposition in many of the world's leading e-commerce markets.
Stores provide support for the significant proportion of retail
online orders picked in stores and fulfilled through click &
collect, in-person returns, and fast delivery. Kingfisher, with
over 1,350 stores, is therefore very well positioned to address the
clear e-commerce opportunity. Through necessity, during the
coronavirus crisis we rapidly transformed our operations to meet a
material increase in online transactions through our click &
collect service, with considerable success. Home delivery from some
of our stores was also quickly introduced to meet our customers'
needs.
In FY 19/20, e-commerce sales accounted for 8% of Group sales
(FY 18/19: 6%), more than double the penetration level in FY 15/16.
Click & collect is our largest and fastest growing channel at a
Group level, growing by 24% in FY 19/20 and accounting for 62% of
e-commerce sales (47% excluding Screwfix). Screwfix's
industry-leading omnichannel capability has helped drive e-commerce
sales penetration at this business to 33% in FY 19/20.
E-commerce sales penetration at our other banners was c.3% on
average in FY 19/20, which is not commensurate with their brand
recognition and scale of their physical footprint. In FY 19/20 we
had over 900 million web visits across all our retail banners, with
the highest conversion to transactions seen at Screwfix. However,
our overall conversion rate was too low, and we have significant
opportunities to increase conversion and e-commerce sales.
We will achieve this through a combination of:
-- Shifting to store-based picking and fulfilment as a priority
, redesigning the store operating model accordingly to enable a
more efficient delivery and click & collect network, with
specific categories delivered from fulfilment centres (FCs)
-- Developing efficient last-mile delivery from stores , enabling faster fulfilment capability
-- Prioritising rollout of the Group's digital technology stack
, enabling more efficient and agile digital capabilities, supported
by a more balanced local-Group operating model for IT
-- Exploring use of e-commerce marketplaces , with common
technology and vendor management, but tailored customer
propositions by retail banner
Jean-Jacques Van Oosten, a highly experienced e-commerce
retailer, was appointed Chief Customer and Digital Officer in
January 2020, and is driving the development of our e-commerce
strategy and overall ambition in this area.
4. Build a mobile-first and service orientated customer experience
We intend to make it easier for customers to shop with us by
building a mobile-first, data-led and service orientated customer
experience.
More than ever, mobile is at the centre of our customers' home
improvement journeys and experiences, from the point at which their
initial needs emerge, all the way through to purchase, delivery,
building and installation. Mobile already accounts for 46% of
Kingfisher's digital traffic, and we believe will remain the focal
point of the end-to-end customer journey and experience. Through
our mobile-first approach we will make it easier for customers to
shop online and in-store.
We will leverage customer data and analytics to personalise
content and offers, while considering partnerships.
We also aim to provide customers with a more compelling and
complete services offer, including in-store services (e.g. paint
mixing, timber cutting), visualisation tools, installation services
and consumer credit. We are exploring the development of service
platforms to provide a wide range of services for customer projects
and the ability to link customers with trade professionals online.
We will also explore strategic partnerships to accelerate
development.
5. Differentiate and grow through own exclusive brands (OEB)
Over the last four years, Kingfisher has consolidated its offer
development and product sourcing capability using its collective
scale. Through product unification, rationalising the number of
SKUs* and suppliers, Kingfisher has driven cost price reduction.
The organisation has also developed its own exclusive brand (OEB)
development and sourcing capability, which brings innovation to
Kingfisher's customers across seven core categories - surfaces
& décor, tools & hardware, bathroom & storage, kitchen,
EPHC (electricals, plumbing, heating & cooling), building &
joinery, outdoor.
In FY 19/20, 63% of product ranges (COGS) were unified, with the
sales and gross margin % from unified ranges growing and
outperforming non-unified ranges. OEB represents 39% of Group
sales, with the balance including local, national and international
brands as well as unbranded products.
OEB provides a strong point of differentiation for Kingfisher in
terms of design, functionality and value for money, as well as
providing us with a higher gross margin opportunity. There have
been some notable successes with categories such as bathroom
furniture, hand tools and workwear delivering sales growth and
improved margins across the Group.
We aim to grow our proportion of sales which are OEB, bringing
innovation to our ranges. With the right operating model, our Offer
& Sourcing organisation and OEB product development will be a
significant source of value for our retail banners and their
customers, working closely to provide product differentiation and
cost price reduction. We aim in parallel to simplify our OEB
development approach to bring new products to market more quickly,
supporting profitable sales growth.
At the same time, international and local brands remain
important for our customers. It is therefore critical that strong
feedback loops are set up between local markets and the Group as
ranges are built. In several cases, Group scale has been
prioritised over local customer needs. We need to change the
balance between Group and our banners and make sure that we
introduce the brands that our customers are looking for in each of
our markets.
6. Test new store concepts and adapt our store footprint
We firmly believe that the role of the store is integral to
long-term success in retail. Our 1,350+ stores are key to
delivering a seamless customer experience, whether goods are
purchased in-store or via click & collect or, for home
delivery. Customers use our stores for inspiration and
visualisation, advice and design services, immediate access to
product and in-person returns. Stores also enable customers
shopping for projects (e.g. kitchen and bathroom) to purchase
products across multiple categories.
However, we must adapt some of our stores to changing customer
demands to make sure that they consistently provide a good customer
experience, are an excellent source of advice and knowledge, are
integrated with e-commerce, and allow for quick fulfilment where
required. We will develop more compact stores, experiment with
innovative stores formats, and explore partnerships including
'shop-in-shop', concessions and franchising.
Kingfisher is a multiformat retailer with over 600 mid and
big-box stores (excluding Screwfix). Approximately 40% of our total
store estate by space is freehold which provides operational and
financial flexibility. For stores that are leased, our weighted
average unexpired lease term (WAULT) for the Group of seven years
is relatively short, again providing flexibility as we shape our
footprint to reflect the increasing customer need for convenience
and immediacy.
In FY 19/20 we generated cash proceeds of GBP188 million through
a combination of sale and leasebacks and freehold sales. We will
manage our existing store portfolio actively with a greater focus
on achieving lower property costs and higher sales densities, while
accelerating new store concept trials.
7. Source and buy better, reduce our costs and our inventory
Although the Group has achieved cost price reductions through
collective sourcing arrangements over the past four years, we
believe that we can extract further value from buying and sourcing
through the intelligent use of our scale. This will be a continued
area of focus for Kingfisher.
Due to the significant number of change initiatives over the
last four years as well as our complex organisational structure,
Kingfisher's costs and inventory levels have become too high, both
in absolute terms and relative to Group sales.
As described above, we believe that there are significant cost
reduction opportunities across Kingfisher - in areas such as goods
not for resale (GNFR), store operating efficiencies, property costs
(including lease renegotiations), supply and logistics, and central
costs, all of which will benefit from reduced organisational
complexity. Work is underway to validate and measure these
opportunities, including the capital and one-off expenditure
required to achieve these savings, balanced against cost inflation
and the future investment requirements of our business.
Reducing inventory levels and improving inventory turn is also a
major priority for the Group. Our net inventory (including amounts
classified as held for sale, relating to our business in Russia) in
constant currency has increased in value by GBP0.5 billion (or 23%)
to GBP2.6 billion over the last four years, while Group total sales
in constant currency over the same period has been flat at GBP11.5
billion. The increase of inventory largely reflects the change in
Kingfisher's sourcing model, store expansion in Screwfix and
Poland, and inefficiencies within our supply chain, notably in
France. We have a plan in place to reduce 'same-store' inventories
over the medium term through a combination of better planning and
forecasting, alignment of display principles, and consolidation of
slow-moving product.
8. Lead the industry in Responsible Business practices
Kingfisher has been taking the lead on responsible business for
over two decades - from our first responsible timber sourcing
policy over 25 years ago, to our leadership on the circular economy
as founding partners of the Ellen MacArthur Foundation.
We are committed to doing everything we can to make a positive
impact on society so that our customers' homes and wider
communities can flourish. During 2020, this commitment has helped
shape our response to the coronavirus crisis, which presents an
unprecedented challenge to society, to businesses, and to all our
colleagues, customers, suppliers and other stakeholders. We will
continue to play our part in addressing the global challenge of
climate change and supporting many of the people across Europe
living in homes that are unfit - too small, too dark, too cold and
too damp.
In Q4 19/20, we revisited our Responsible Business strategy and
identified four key priorities, where we can use our experience,
scale and influence to go even further in bringing about positive
change:
-- We will be an inclusive company , breaking down barriers to
employment and progression, and by providing five million hours of
learning by 2025 through our 'skills for life' programme. We will
also have inclusivity action plans in place for all our businesses
by the end of FY 20/21, and have targeted improved gender balance
in management.
-- We help make greener, healthier homes affordable . We are
aiming for 50% of our total group sales in FY 20/21 to come from
products that help our customers create greener, healthier
homes.
-- Fight to fix bad housing , by helping more than one million
people whose housing needs are greatest by 2025.
-- We will help tackle climate change and create more forests
than we use , delivering 100% responsibly sourced wood and paper in
all the products we sell by the end of FY 20/21, becoming
'forest-positive' by 2025 through supporting reforestation projects
from 2021 and achieving our approved science-based carbon reduction
targets as previously committed.
For the first time, in FY 20/21, an element of Kingfisher's
employee bonus plan will be linked to performance against
Responsible Business measures.
These four priority areas are underpinned by our Responsible
Business fundamentals - the many issues and impacts that we need to
measure and manage to ensure we continue to operate responsibly
across our business - from ethical sourcing and human rights, to
health and safety and waste and recycling.
We are improving our governance with a new Responsible Business
Committee (RBC), reporting to Kingfisher's Board of Directors. The
RBC is a committee of the Board, meeting at least twice a year,
chaired by Sophie Gasperment, a non-executive director (NED) of the
Board. The RBC also includes the Group CEO, one more NED, our Chief
Offer & Sourcing Officer, and our Chief People Officer.
We also continue to feature prominently in key investor indices
and score highly with ESG rating agencies including:
-- A 'AAA' rating from the MSCI;
-- ISS ESG Corporate Rating of B- ('Prime' status);
-- Maintaining our 'A-' leadership position in CDP Climate Change; and
-- A constituent of the Dow Jones Sustainability Index (DJSI)
Please visit www.kingfisher.com/sustainability for further
details.
Brexit preparation
Kingfisher's internal Brexit steering committee, in place since
the outcome of the UK referendum on EU membership in June 2016,
continues to assess the progress and adequacy of the business'
contingency planning. We are continuing with our planning
throughout 2020 to meet the requirements of either a new trading
relationship with the EU or, if no trade agreement is reached, the
UK abiding by World Trade Organisation (WTO) rules. We have taken
several measures to mitigate delays at the border as far as
possible, such as increasing the number of ports used for deep-sea
imports and securing access to simplified customs procedures. We
will continue with our vendor engagement programme to ascertain
their readiness to operate under a hard border with the UK,
providing support where needed.
On tariffs, we note the publication of the UK's new Global
Tariff (UKGT) in May 2020. In the event that no Free Trade
Agreement is reached with the EU, and the UKGT is applied, we
expect that EU and non-EU imports would attract an average tariff
of c.2% on our products. This would be slightly lower than the
current average duty rate for all direct imports into the UK. On
people-related matters, there has been no significant impact on
either retention or hiring following the referendum. Kingfisher has
a low dependency on European Economic Area (EEA) nationals in its
UK stores and distribution centres. We will continue to monitor the
status of Brexit negotiations, and review and adjust our
contingency planning accordingly.
Summary and outlook
FY 19/20 was a challenging year for Kingfisher and our financial
results were disappointing. Thierry Garnier was appointed as CEO in
late September 2019 and the Group Executive team has been rebuilt
including seven additional appointments. The initial focus in Q4
19/20 was on improving our operations in France, implementing new
trading approaches and recalibrating the balance between Group and
local activities. We are encouraged that in Q4 19/20, and early FY
20/21, we delivered improved LFL sales trends.
However, since mid-March 2020 we have been operating in, and
responding to, a rapidly changing environment as the COVID-19
outbreak spread and governments and businesses took action to
contain its impact. Since the COVID-19 crisis started, our
priorities have been clear - to provide support to the communities
we serve, to fulfil our obligations to colleagues as a responsible
employer, to our customers as a retailer of essential goods, and to
protect our business for the long term.
Despite Kingfisher stores being classified as essential in most
of our markets, we took the decision initially to close in-store
browsing and purchasing in the UK and France. Following this, we
quickly adapted our operating model to help meet customers'
essential needs - initially through contactless e-commerce and then
through phased store reopenings, whilst in parallel developing
safety and social distancing protocols for colleagues and customers
which are likely to remain with us for some time. As a result we
have seen up to fourfold e-commerce growth since mid-March, and an
improving relative sales trend with Group LFL sales moving from
-74.0% in the first week of April to more than +25% since the
second week of May.
We have also taken significant action to reduce costs and
optimise our cash flow to minimise the impact of lower sales on our
business and financial performance. We have also put in place
c.GBP1.4 billion of additional liquidity arrangements in order to
provide us with further security and headroom.
Overall, the operational and financial actions we have taken
give us a sound footing in the current crisis and beyond. However
given the continued impact and uncertainty of changes in the
magnitude and duration of COVID-19, no specific financial guidance
has been provided for FY 20/21.
Financial priorities
Our immediate financial priority is to manage the impact of the
COVID-19 crisis on our business and financial performance ( see
Section 2 below).
Beyond the coronavirus crisis, our new 'Powered by Kingfisher'
strategic plan will empower our distinct retail banners, simplify
Kingfisher's operating model, embrace digital and own exclusive
brands, and return the business to growth.
Through the implementation of this plan we are focused on growth
and creating shareholder value, with the following financial
priorities:
-- Prioritise sales growth in all retail banners
-- Drive benefits from buying, sourcing and product development
-- Focus on operational efficiency, simplifying the organisation and reducing associated cost
-- Focus on growing retail profit
-- Reduce 'same-store' inventory
Medium term capital allocation
We aim to allocate capital, subject to strict returns criteria,
to meet the strategic needs of the business. We aim to maintain an
investment grade credit rating and, over the medium term, a target
range of 2.0 to 2.5 times net debt to EBITDA (post-IFRS 16).
As announced on 23 March 2020, in light of the unprecedented
uncertainty caused by COVID-19, the Board will not propose a final
dividend in relation to FY 19/20. The Board recognises the
importance of dividends to shareholders and intends to consider the
appropriateness , quantum and timing of future dividend payments
when it has a clearer view of the scale and duration of the impact
of COVID-19 on the business.
Section 2: Managing the impact of COVID-19
Risk management
Following the COVID-19 outbreak in Asia, Kingfisher formed
central and retail business crisis committees in January 2020 to
monitor and manage risks and impacts of COVID-19. These committees
continue to monitor closely the impact on all areas of our
business, as well as ensuring publicly available advice is followed
and that appropriate safeguards are quickly implemented. From the
start of the outbreak, Kingfisher has taken measures to protect its
colleagues and customers, to support governments across its
markets, to be a responsible employer, to limit the impact on
profitability and to preserve financial flexibility.
Supporting our communities and governments
Kingfisher reaffirms its commitment to supporting communities
and governments in managing the COVID-19 pandemic. As a responsible
retailer we are focused on making sure that we can continue to
serve our customers' essential needs as effectively as possible,
while protecting the safety of all concerned.
As part of this commitment, in March we ringfenced all remaining
stock of personal protective equipment (PPE) and donated it to
frontline healthcare workers. Total committed donations to our
communities and health authorities amount to over GBP2.5 million so
far. Additional PPE continues to be ordered and as a priority is
being donated to health authorities in the countries in which we
operate as well as being used to equip our colleagues.
Social distancing and safety measures
Based on government advice, and learnings from internal best
practices and major food retailers across Europe, all reopened
Kingfisher stores operate under strict social distancing and safety
measures to protect customers and colleagues. These include:
-- The provision of gloves, visors and masks to colleagues
-- Limiting the number of customers in store
-- Safe queuing before entering the store
-- Sanitiser stations throughout the store
-- Floor navigational markers to help enforce social distancing
-- Perspex screens at paint mixing and timber cutting stations, in showrooms and at checkouts
-- Encouraging contactless or card payments (notwithstanding the
legal obligation in some markets to accept cash as payment)
Similar measures are also in place at our distribution and
fulfilment centres, and training has been provided to colleagues to
help support and implement these changes to their work
environment.
In most cases, the measures applied have gone beyond government
recommendations in each market. Furthermore, we have set up formal
and regular internal audits of the application of health, hygiene
and safety rules. To date these measures have been met with strong
approval by both customers and colleagues and we continue to both
monitor and improve the effectiveness of these on a day-to-day
basis.
Supply chain and availability
Kingfisher has global sourcing offices in China, other Asian
countries and Europe. Approximately 75% of our total annual cost of
goods sold (COGS) is directly sourced from Europe, with the balance
sourced from other markets including Asia.
In China, all our vendors' factories have reopened, with
capacity rebuilt. The vast majority of orders that were impacted
with delays from the initial coronavirus crisis outbreak in China
have been shipped and are now in our supply chain. In partnership
with our vendors we continue to review and adjust our future order
commitments, in line with our evolving demand and operating
model.
In Europe, all our vendors have now reopened. The key risks to
availability are now driven by exceptional and volatile demand
within the paint, outdoor and building materials ranges, where
vendors are challenged in keeping up with recent high demand
levels. We continue to work closely with our key vendors to speed
up production and accelerate our supply chain within these specific
categories.
Operational status
Nearly all our 1,368 stores are open for in-store purchasing,
under the strict social distancing and safety measures described
above.
Following our previous update on 12 May 2020, updates to the
operational status in each of our markets are highlighted below in
italics:
-- United Kingdom:
- On 23 March the UK government ordered the closure of all shops
selling 'non-essential' goods. Hardware shops were categorised as
'essential', and therefore B&Q and Screwfix were eligible to
remain open.
- Despite this, from 23 March, we took the decision to close all
B&Q and Screwfix stores to customers for browsing and in-store
purchasing while we established safe store operating protocols.
- B&Q: To ensure the continued supply of essential goods,
from 24 March we progressively introduced a contactless click &
collect service for our B&Q customers, alongside a home
delivery service. On 17 April we trialled the reopening of 14
B&Q stores, listening to feedback from our store colleagues and
adapting our approach as a result. Following the success of this
trial we progressively reopened further B&Q stores. Currently,
all 289 stores are open. From 22 May we commenced the reopening of
kitchen and bathroom showrooms on a phased basis following positive
trials in a small number of stores.
- Screwfix: For our Screwfix stores, we successfully offered a
contactless click & collect service throughout the entire UK
lockdown period. In the second week of May we introduced new
customer journeys and processes within Screwfix stores, in order to
safely restart in-store browsing and purchasing. These were rolled
out to most of our 682 Screwfix stores by the end of May.
-- Republic of Ireland:
- From 28 March, all stores in Ireland (eight B&Q and five
Screwfix) were closed following the Irish government's lockdown
restrictions. Hardware shops were categorised as 'online only', and
therefore not eligible to remain open.
- All stores reopened on 18 May, in line with the government's
easing of lockdown restrictions as announced on 1 May. Strict
social distancing and safety measures have been put in place for
all Irish stores.
-- France:
- On 14 March the French government ordered the closure of all
shops selling 'non-essential' goods during the confinement period,
which ended on 11 May.
- Kingfisher's 219 stores in France were categorised as
'essential', and therefore were eligible to remain open during this
period. Despite this, to establish safe store operating protocols,
from 15 March all 98 Castorama stores and 121 Brico Dépôt stores
were closed to customers for browsing and in-store purchasing.
- A contactless click & collect service via 'drive-through'
was gradually introduced from 23 March, alongside a home delivery
service.
- Home delivery from stores commenced during the third week of April.
- Following consultation with trade union representatives in
stores and head offices, from 24 April we started to reopen
Castorama and Brico Dépôt stores in phases, initially with a
'self-service' range, and under the strict social distancing and
safety measures described above.
- By 11 May (the end of the French confinement period) all
stores had reopened, under the same strict measures.
-- Poland:
- All 81 stores in Poland remain open, operating under strict
social distancing and safety measures.
- In addition to the existing Sunday trading ban, all stores in
Poland were temporarily required to close on Saturdays during
April. This restriction was lifted on 4 May.
-- Romania:
- All 35 stores in Romania remain open, operating under strict
social distancing and safety measures.
-- Iberia:
- In line with the Spanish government's plan to ease lockdown
restrictions, as announced on 28 April, we started reopening our
stores to tradespeople from 13 May and to the general public from
25 May, in phases.
- All 28 stores in Spain had previously been closed following
the government's declaration of a state of emergency on 14 March. A
home delivery service was made available in late March, and a
contactless click & collect service for tradespeople was
launched in late April.
- Our three stores in Portugal remain open, operating under
strict social distancing and safety measures.
-- Russia:
- Of our 18 stores in Russia, 12 stores are open and six have partly reopened.
- A contactless click & collect service, and 'click & delivery', is available from all stores.
Trading since 1 February 2020
LFL sales by month (1)
Monthly sales % LFL(2) Change
------------------------------------------
Feb 2020 Mar 2020 Apr 2020 May 2020
--------------------- --------- --------- --------- ---------
UK & Ireland* +6.2% (5.7)% (43.0)% +15.5%
France +8.6% (52.0)% (69.0)% +23.6%
Poland +11.1% (13.7)% (20.4)% +16.3%
Romania(3) +16.4% +15.9% (15.0)% (14.3)%
Group LFL(4)
incl. leap year +7.6% (24.6)% (49.6)% +14.3%
--------------------- --------- --------- --------- ---------
Group LFL(4)
excl. leap year +2.3%
--------------------- --------- --------- --------- ---------
E-commerce sales(5) +30.2% +59.1% +251.9% +205.1%
March to June LFL sales by week (to 13 June 2020) (1)
Sales: 4 weeks to % LFL(2) Change
----------------------------------------------
28 March 2020 March 2020
week 1(6) week 2(6) week 3(6) week 4(6)
--------------------- ---------- ---------- ---------- ----------
UK & Ireland +2.1% +8.6% +37.8% (42.2)%
France (0.2)% +5.6% (97.7)% (93.3)%
Poland +3.6% +3.7% (21.7)% (23.7)%
Romania +9.1% (1.3)% (4.8)% (47.1)%
Group LFL(4) +1.5% +6.4% (22.9)% (59.1)%
--------------------- ---------- ---------- ---------- ----------
E-commerce sales(5) +28.4% +23.9% +49.5% +96.2%
Sales: 5 weeks to % LFL(2) Change
----------------------------------------------------------
2 May 2020 April 2020
week 1(6) week 2(6) week 3(6) week 4(6) week 5(6)
--------------------- ---------- ---------- ---------- ---------- ----------
UK & Ireland (70.3)% (56.1)% (60.8)% (23.9)% (1.6)%
France (86.8)% (83.3)% (77.0)% (63.1)% (35.2)%
Poland (52.0)% (38.9)% (42.1)% +14.5% (8.8)%
Romania (48.6)% (28.4)% (27.9)% (5.3)% +42.4%
Group LFL(4) (74.0)% (64.8)% (64.6)% (35.6)% (17.5)%
--------------------- ---------- ---------- ---------- ---------- ----------
E-commerce sales(5) +159.7% +277.9% +273.6% +307.0% +186.7%
Sales: 4 weeks to % LFL(2) Change
----------------------------------------------
30 May 2020 May 2020
week 1(6) week 2(6) week 3(6) week 4(6)
--------------------- ---------- ---------- ---------- ------------
UK & Ireland +18.9% +13.3% +18.2% +21.5%
France (18.7)% +53.7% +58.1% +44.2%
Poland +35.8% +30.8% +34.4% +11.0%
Romania +16.0% +27.8% +37.6% +34.9%
Group LFL(4) +2.7% +25.5% +30.6% +26.7%
--------------------- ---------- ---------- ---------- ------------
E-commerce sales(5) +199.0% +210.6% +212.3% +192.5%
Sales: 2 weeks to % LFL(2) Change
----------------------
13 June 2020 June 2020
week 1(6) week 2(6)
--------------------- ---------- ------------
UK & Ireland +26.3% +29.5%
France +41.4% +38.4%
Poland +11.7% +0.7%
Romania +30.2% +20.3%
Group LFL(4) +28.7% +27.7%
--------------------- ---------- ------------
E-commerce sales(5) +207.4% +211.3%
(1) This information was not extracted from FY 19/20 financial
statements and has not been subject to audit procedures.
(2) LFL (like-for-like) sales growth represents the constant
currency, year on year sales growth for stores that have been open
for more than one year. Stores temporarily closed or otherwise
impacted due to COVID-19 are also included.
(3) Kingfisher's subsidiary in Romania prepares their financial
statements to 31 December. Their monthly results presented are for
January to April, i.e. one month in arrears. The weekly results
presented have no corresponding delay.
(4) Group LFL includes total e-commerce sales. Group LFL also
includes Iberia and Russia, and excludes Koçta (Kingfisher's 50% JV
in Turkey).
(5) E-commerce sales are total sales derived from online
transactions, including click & collect. This includes sales
transacted on any device, however not sales through a call centre.
E-commerce sales change includes UK & Ireland, France and
Poland, and the benefit from the leap year in February 2020.
(6) March, April, May and June weekly sales figures are for
Sunday-to-Saturday weeks from 1 March 2020 (compared against prior
year Sunday-to-Saturday weeks from 3 March 2019). The figures are
provisional, and exclude certain non-cash accounting adjustments
relating to revenue recognition.
Up to 14 March (pre-coronavirus lockdown measures)
As previously announced, trading from 1 February up to 14 March
(before any COVID-related store closures) continued the positive
trends we saw in Q4 19/20, benefiting from operational improvements
in France and a new trading approach across the Group, including
local trading events.
In February 2020, Group LFL sales growth was +7.6%, or +2.3%
excluding the leap year impact. In France, we performed slightly
better than the 'market' in February ('market' based on Banque de
France data for DIY retail sales (non-seasonally adjusted)).
In the first two weeks of March (up to and including 14 March)
Group LFL sales continued to be positive, with growth across all
businesses within our core markets, strongly supported by
e-commerce sales.
Weekly trading 14 March to 25 April
In the third week of March, the UK continued to see positive LFL
sales growth, France was severely impacted by the closure of all
its stores and Poland experienced lower footfall and sales. The
last week of March was impacted by UK store closures following the
government's announcement on 23 March, together with lower footfall
in Romania.
The first week of April reflected the first full week of store
closures in both the UK and France, although we saw an increasing
contribution from e-commerce sales in France. The trend improved in
the second and third weeks of April as we rapidly transformed our
operations to meet a sharp increase in e-commerce demand, with
e-commerce sales increasing week-on-week in the UK and France.
Furthermore, in France we started to reopen some of our stores'
Building & Joinery external courtyards in the third week of
April.
The fourth week of April reflected a significant improvement in
the UK at both B&Q and Screwfix, largely due to increasing
demand via contactless click & collect, and the reopening of
some B&Q stores towards the end of the week. In addition, the
trend in France improved as we opened more of our stores' Building
& Joinery external courtyards. Poland experienced growth as
lockdown measures started to be eased.
Weekly trading since 25 April
From the final week of April, the Group LFL sales trend
continued to improve due to phased store reopenings in the UK and
France (as noted in the 'Operational status' above). Sales growth
in the first week of May was largely driven by exceptional demand
at B&Q and Castorama Poland. This continued throughout May and
into June, where we also saw exceptional demand in France following
the end of the confinement period on 11 May. In the last week of
May, Poland LFL sales were adversely impacted by the Sunday trading
ban. As a reminder, one further Sunday of trading each month was
removed from January 2020 (there were three non-trading Sundays in
2019). In the second week of June, Poland and Romania LFL sales
were both adversely impacted by a public holiday.
Financial impact
Given the continued impact and uncertainty of changes in the
magnitude and duration of COVID-19, it is too early to quantify the
impact of COVID-19 on our expectations for FY 20/21.
In particular there is uncertainty around the potential
resurgence of the COVID-19 virus and its potential impact on
household spending and the wider economies within the markets in
which the Group operates. To assess the likely impact on cash flow
and liquidity, we have modelled the financial impact from various
scenarios of reduced sales. These scenarios include prolonged
periods of disruption to the business from lockdown restrictions.
Further details of the risk assessment and cash flow scenario
modelling are provided in the directors' assessment of going
concern (within note 2 of the full year condensed financial
statements in part 2 of this announcement).
Whilst we do not consider the impact of COVID-19 to be a longer
term viability risk, we view this disruption, if extended in scope
and duration, as posing a risk, albeit remote, to short-term
liquidity. As a result, we have taken significant and effective
actions to reduce costs and optimise our cash flow and liquidity.
Many of these actions are detailed below.
Actions to reduce costs and preserve cash
Kingfisher continues to monitor closely the financial impact of
COVID-19 and take mitigating actions. It has implemented multiple
actions to reduce costs and preserve cash, including the benefit
from several government support measures:
-- Furloughing: Kingfisher welcomed the announcement of the
Coronavirus Job Retention Scheme (CJRS) in the UK, 'activité
partielle' relief measures in France, and similar schemes in Spain
and Romania. The Group is supportive of each of these government's
measures and, since mid-March 2020, gradually announced furlough
programmes to colleagues in the UK, France, Spain and Romania. This
led to c.50% of our total Group colleagues being furloughed in
April, although this figure reduced significantly to c.10% by the
end of May as we reopened stores within the UK and France. With the
exception of those who are vulnerable and/or at a higher risk of
infection, all remaining colleagues in France and Romania returned
from furlough on 1 June, with remaining colleagues in the UK and
Spain expected back by 1 July. From this date we have decided to no
longer claim under the furlough programmes in the UK and
France.
-- UK business rates: The UK government announced in March that
retail premises in England will be granted a 'holiday' from paying
business rates in the 2020/21 tax year, effective from April.
Kingfisher's annual business rates bill for retail premises in
England is c.GBP120 million. Similar measures (a combination of
payment deferrals and 'holidays') have been announced by the local
governments and assemblies of Scotland, Wales and Northern Ireland,
where in aggregate our annual business rates bill for retail
premises is c.GBP20 million.
-- Store operating efficiencies: In conjunction with our
furlough programmes and the operational requirements of our stores,
other measures have been put in place to reduce store variable
costs, including reducing non-essential store maintenance costs and
optimising store opening hours.
-- Discretionary costs: Discretionary P&L spend has been
significantly reduced, including marketing, advertising,
consumables and other GNFR spend, stopping all travel, and freezing
all pay reviews and full-time staff recruitment.
-- Inventory purchases: Beyond the corresponding reductions from
lower sales, we have adjusted our purchasing plans in response to
the significant changes in operational requirements across our
Group. We continue to monitor trends in demand closely, working
with suppliers to reduce product purchasing in certain categories,
and increase stock in others.
-- Capital expenditure: From mid-March all non-committed
development capital expenditure (for example, IT and new stores)
was paused, and repairs and maintenance capital expenditure reduced
to essential items. Following the reopening of stores from
mid-April onwards, all such expenditure plans are being evaluated
on a case-by-case basis by the Group's investment committee.
Obligatory contractual, legal or health and safety expenditures
continue as normal.
-- Dividend: As announced on 23 March 2020, in light of the
unprecedented uncertainty caused by COVID-19, the Board will not
propose a final dividend in relation to FY 19/20. The Board intends
to consider the appropriateness, quantum and timing of future
dividend payments when it has a clearer view of the scale and
duration of the impact of COVID-19 on the business. The cash cost
of last year's final dividend was GBP157 million.
-- Rental payments: We remain in active discussions with
landlords in all our markets and have seen a positive and
constructive response. In the UK and France, we have moved a
significant proportion of our quarterly-in-advance rental payments
to monthly payments.
-- Deferral of indirect taxation (VAT) payments: The UK
government announced in March that all UK VAT-registered businesses
have the option to defer any VAT payments due between 20 March 2020
and 30 June 2020. Payments must be made on or before 31 March
2021.
-- Payments to suppliers: To help optimise working capital in
the short term, mutual agreements were reached with certain larger
suppliers to extend payment terms by 30 days or more.
Notwithstanding this, we have maintained our policy to pay all
suppliers in full and according to contractual payment terms.
Board and Group Executive team remuneration
In recognition of the impact of the above measures on
Kingfisher's stakeholders and, at the request of the Board and
Group Executive team, in March the Company's Remuneration Committee
applied the following discretionary measures regarding executive
remuneration:
-- The entire Board and Group Executive team has voluntarily
offered to temporarily forego 20% of their base salaries or Board
fees.
-- The Group CEO and Group CFO will receive no annual FY 19/20 bonus payment.
Cash position
As at 31 January 2020, Kingfisher had cash and cash equivalents
of GBP195 million, including GBP6 million of cash held in Russia
and included within assets held for sale on the balance sheet.
As announced on 12 May 2020, Kingfisher arranged a EUR600
million (c.GBP535 million) term facility with three French banks in
support of its operations in France. The loan is guaranteed at 80%
by the French State ('Prêt garanti par l'État') and has a maturity
of one year, extendable for up to five years. As required under the
terms of the loan, the full amount was drawn down on 18 May
2020.
On 12 May 2020, Kingfisher also announced its eligibility to
access funding under the Bank of England's Covid Corporate
Financing Facility (CCFF ). On 12 June, Kingfisher issued GBP600
million of 11-month commercial paper under the CCFF. While this
additional liquidity is not currently needed, even under
Kingfisher's worst case COVID-19 scenario as assessed by the Board
of Directors, it could be required should the pandemic be
significantly more prolonged or severe.
As at 12 June 2020, Kingfisher had cash and cash equivalents of
c.GBP2 billion, including receipts from the Prêt garanti par l'État
and CCFF.
Between 1 February and 12 June 2020, the Group's net cash inflow
(+/-) was c.GBP730 million, benefiting in recent weeks from the
reopening of stores in the UK and France as well as the cost and
cash preservation actions detailed above.
The Group also has access to undrawn Revolving Credit Facilities
(RCFs) of GBP250 million (due to expire in May 2021), GBP225
million (due to expire in March 2022) and GBP550 million (due to
expire in August 2022), totalling GBP1,025 million.
Liquidity headroom
The Group has significant liquidity headroom with its current
cash balance to cover a prolonged period of reduced sales. As at 12
June 2020, the Group had access to over GBP3 billion in total
liquidity, including cash and cash equivalents and access to over
GBP1 billion of funding under the RCFs.
(+/-) Represents net change in cash at bank excluding physical
cash in tills and cash in transit. Excludes receipts from the Prêt
garanti par l'État and CCFF, and any repayments of debt.
Section 3: Adoption of IFRS 16 and reallocation of costs
IFRS 16 'Leases'
The IFRS 16 'Leases' accounting standard applies to Kingfisher
from 1 February 2019, replacing the previous accounting standard
IAS 17. The Group has adopted the full retrospective transition
option and therefore has restated comparatives.
Central support costs
In recent years the Group has developed its offer, sourcing and
supply chain organisations. The services and benefits provided to
each of Kingfisher's retail banners have evolved over time.
Consequently, management has updated its assessment of how the
Group's centrally-incurred costs are most appropriately allocated
across the businesses. Although neutral at a Group retail profit
level, this has resulted in a change to retail profit by geography
for FY 19/20, with the principal effect of more costs being
allocated to Poland and less to the UK & Ireland.
Transformation P&L costs
The Group no longer reports profits on an 'underlying' basis.
The term 'underlying' referred to the relevant adjusted measure
being reported before non-exceptional transformation P&L costs.
Non-exceptional transformation P&L costs represented the
additional costs that arose only as a result of the transformation
plan launched in 2016/17 which, either because of their nature or
the length of the period over which they were incurred, were not
considered as exceptional items. With the launch of the Group's new
strategy, 'Powered by Kingfisher', any further 'start-up' or
incremental costs of change will not be separately disclosed in the
future. The removal of the 'underlying' basis of reporting ensures
consistency with that principle and ensures a simpler comparison of
business performance.
As a result, FY 18/19 retail profit and central costs have been
restated to include their respective share of costs previously
reported as non-exceptional transformation P&L costs. Note that
operating profit and adjusted performance measures are unaffected
by this change.
Summary of impacts
An overview of the impact on FY 19/20 and FY 18/19 of the r
eallocation of central support costs and transformation P&L
costs, is summarised on the following page. An overview of the
impact on H1 19/20 and H1 18/19 of the reallocation of central
support costs and transformation P&L costs is provided in the
FY 19/20 data tables published on www.kingfisher.com .
An overview of the income statement impact on FY 18/19 of the
adoption of IFRS 16 is also summarised on the following page. In
addition, detailed restatement tables and associated commentary for
the impact of IFRS 16 on FY 18/19 is provided in note 13 of the
full year condensed financial statements (in part 2 of this
announcement).
Summary of impacts (continued)
2019/20 Reallocation of 2019/20
costs
---------------------------- ------------------------
Pre- reallocations Central Transformation As
GBPm support P&L reported
---------------------------- ------------------ -------- -------------- ---------
UK & Ireland 501 14 (16) 499
------------------------------ ------------------ -------- -------------- ---------
France 168 3 (7) 164
------------------------------ ------------------ -------- -------------- ---------
Poland 165 (13) (1) 151
Romania (15) (3) (5) (23)
Iberia 3 (1) - 2
Russia (12) - - (12)
Screwfix Germany (4) - - (4)
Turkey (50% joint venture) 9 - - 9
------------------------------ ------------------ -------- -------------- ---------
Other International* 146 (17) (6) 123
------------------------------ ------------------ -------- -------------- ---------
Retail profit 815 - (29) 786
------------------------------ ------------------ -------- -------------- ---------
Central costs (54) - (8) (62)
Share of JV interest
and tax (7) - - (7)
Transformation P&L
costs (37) - 37 -
------------------------------ ------------------ -------- -------------- ---------
Operating profit
(before exceptional
items) 717 - - 717
------------------------------ ------------------ -------- -------------- ---------
Net finance costs
(before exceptional
items) (173) - - (173)
Adjusted pre-tax profit 544 - - 544
------------------------------ ------------------ -------- -------------- ---------
Exceptional items (441) - - (441)
Statutory pre-tax profit 103 - - 103
------------------------------ ------------------ -------- -------------- ---------
2018/19 2018/19 Reallocation of 2018/19
costs
---------------------------- ------------------------
IAS 17 Impact As previously Central Transformation Restated
basis of reported support P&L
GBPm IFRS 16
---------------------------- ------- -------- ------------- -------- -------------- --------
UK & Ireland 399 131 530 13 (45) 498
---------------------------- ------- -------- ------------- -------- -------------- --------
France 209 12 221 - (38) 183
---------------------------- ------- -------- ------------- -------- -------------- --------
Poland 181 4 185 (10) (8) 167
Romania (15) 6 (9) (2) (5) (16)
Iberia 1 5 6 (1) (3) 2
Russia (12) 8 (4) - (1) (5)
Screwfix Germany (16) 2 (14) - - (14)
Turkey (50% joint venture) 6 3 9 - - 9
---------------------------- ------- -------- ------------- -------- -------------- --------
Other International 145 28 173 (13) (17) 143
---------------------------- ------- -------- ------------- -------- -------------- --------
Retail profit 753 171 924 - (100) 824
---------------------------- ------- -------- ------------- -------- -------------- --------
Central costs (49) - (49) - (20) (69)
Share of JV interest
and tax (4) (1) (5) - - (5)
JV FX on lease liabilities - (3) (3) - - (3)
Transformation P&L
costs (120) - (120) - 120 -
---------------------------- ------- -------- ------------- -------- -------------- --------
Operating profit
(before exceptional
items) 580 167 747 - - 747
---------------------------- ------- -------- ------------- -------- -------------- --------
Net finance costs (7) (173) (180) - - (180)
Add back: FX on lease
liabilities - 7 7 - - 7
---------------------------- ------- -------- ------------- -------- -------------- --------
Adjusted pre-tax profit 573 1 574 - - 574
---------------------------- ------- -------- ------------- -------- -------------- --------
Exceptional items (251) (16) (267) - - (267)
FX on lease liabilities - (7) (7) - - (7)
---------------------------- ------- -------- ------------- -------- -------------- --------
Statutory pre-tax profit 322 (22) 300 - - 300
---------------------------- ------- -------- ------------- -------- -------------- --------
Section 4: Trading review by division
Note: all commentary below is in constant currency, reported
under IFRS 16 and reflects the reallocation of central support and
transformation P&L costs as discussed in Section 3 above.
UK & IRELAND
GBPm 2019/20 2018/19 % Reported Change % Constant % LFL
Currency Change
Change
Sales 5,112 5,061 +1.0% +1.0% (0.3)%
-------- -------- ------------------ ----------- --------
Retail profit 499 498 +0.3% +0.3%
-------- -------- ------------------ -----------
Retail profit margin % 9.8% 9.8% - (10)bps
-------- -------- ------------------ -----------
Kingfisher UK & Ireland sales increased by 1.0% (-0.3% LFL)
to GBP5,112 million within the context of a weak demand backdrop.
Gross margin % was flat with sourcing benefits and the uplift from
the discontinuation of installation services at B&Q offset by
incremental clearance of surfaces & décor and kitchen ranges at
B&Q, selective price investment at Screwfix and increased
promotional activity at B&Q in Q4. Costs increased as a result
of wage inflation, digital costs and new store opening costs at
Screwfix which together outweighed a
reduction in transformation costs. Retail profit increased by 0.3% to GBP499 million.
B&Q total sales decreased by 3.1% to GBP3,284 million. LFL
sales decreased by 2.9%. The discontinuation of installation
services impacted LFL by c.-1.5% and disruption on surfaces &
décor and kitchens ranges impacted LFL by c.-2%. LFL sales of
weather-related categories decreased by 1.4% while sales of
non-weather-related categories, including kitchen and bathroom,
were down 3.4%. B&Q's e-commerce sales continued to make good
progress with growth of 17% (including click & collect up 27%),
representing 6% of total B&Q sales.
Across the business, space remained broadly flat with two new
store openings and two store closures.
Screwfix total sales increased by 9.4% (+5.0% LFL) to GBP1,828
million, driven by specialist trade desks exclusive to plumbers and
electricians, strong e-commerce sales growth of 17% (including
click & collect up 23%) and the continued rollout of new
outlets. E-commerce sales represented 33% of total Screwfix
sales.
During the year Screwfix opened 55 new outlets in the UK, with
39 openings in the second half. In December Screwfix opened its
first outlet in the Republic of Ireland, with a total of four
openings by 31 January 2020, to complement its fast-growing online
business in the country. The early performance of these outlets,
prior to the coronavirus crisis, was encouraging.
In total, as at 31 January 2020 Screwfix had 686 outlets in the
UK & Ireland, with a total of 59 new outlets in the year and a
space increase of c.9%.
FRANCE
GBPm 2019/20 2018/19 % Reported Change % Constant % LFL
Currency Change
Change
Sales 4,082 4,272 (4.5)% (3.2)% (3.2)%
-------- -------- ------------------ ----------- --------
Retail profit 164 183 (10.8)% (9.7)%
-------- -------- ------------------ -----------
Retail profit margin % 4.0% 4.3% (30)bps (30)bps
-------- -------- ------------------ -----------
Kingfisher France sales decreased by 3.2% (-3.2% LFL) to
GBP4,082 million, although Q4 saw an improved performance compared
to the first nine months of the year with sales up 3.1% (+3.3%
LFL). Q4 sales were aided by better stock availability, the
reintroduction of promotion-based trading events, and the
reintroduction of some local ranges.
According to Banque de France data, sales for the home
improvement market in France were up c.2% for the year (+4.7% in
Q4). The improvement in sales in Q4 was in part due to prior year
Q4 sales being impacted by c.-3% from national demonstrations
(known as 'gilets jaunes'), although this was partly offset by
nationwide strikes in France in December 2019 and January 2020.
Gross margin % increased by 40 basis points in the year,
reflecting lower overall promotional activity at Brico Dépôt,
partly offset by logistics & stock inefficiencies (mainly in
Castorama France). Costs reduced, reflecting store closures and
staff reduction at Castorama France in addition to lower
transformation costs.
Despite this retail profit decreased by 9.7% to GBP164 million, reflecting lower overall sales.
Castorama total sales decreased by 3.3% (-3.3% LFL) to GBP2,145
million, reflecting price repositioning (c.-1% impact on LFL sales)
and the impact of transformation-related activity (c.-2% impact on
LFL sales). LFL sales of weather-related categories were down 4.1%
and sales of non-weather-related categories, including kitchen and
bathroom, were down 3.2%.
Brico Dépôt total sales decreased by 3.1% (-3.1% LFL) to
GBP1,937 million driven by an overall reduction in promotional
activity, which impacted LFL sales by c.-3 %. In constant currency,
gross profit and gross margin % both increased year on year.
Across the two businesses, space remained broadly flat, with
Castorama closing one store and Brico Dépôt closing two stores in
FY 19/20.
OTHER INTERNATIONAL
GBPm 2019/20 2018/19 % Reported Change % Constant % LFL
Currency Change
Change
Sales 2,319 2,352 (1.4)% (0.2)% (0.8)%
-------- -------- ------------------ ----------- --------
Poland 1,461 1,431 +2.1% +4.0% +1.6%
-------- -------- ------------------ ----------- --------
Romania 216 210 +2.6% +6.1% +8.8%
-------- -------- ------------------ ----------- --------
Other 642 711 (9.7)% (10.3)% (7.6)%
-------- -------- ------------------ ----------- --------
Retail profit 123 143 (13.5)% (11.5)%
-------- -------- ------------------ -----------
Poland 151 167 (9.3)% (7.7)%
-------- -------- ------------------ -----------
Romania (23) (16) n/a n/a
-------- -------- ------------------ -----------
Other (5) (8) n/a n/a
-------- -------- ------------------ -----------
Retail profit margin % n/a n/a n/a n/a
-------- -------- ------------------ -----------
Poland 10.4% 11.7% (130)bps (130)bps
-------- -------- ------------------ -----------
Other International total sales decreased by 0.2% (-0.8% LFL) to
GBP2,319 million, with growth in Poland and Romania offset by
declines in Russia and Iberia. Retail profit decreased by 11.5% to
GBP123 million, reflecting a decline in Poland and an increase in
combined retail losses in Romania and Russia. In Germany, all 19
Screwfix stores were closed during the first half of the year.
Sales in Poland increased by 4.0% (+1.6% LFL) to GBP1,461
million. Four new stores were opened during the year, representing
a c.6% increase in space. The removal of one further Sunday of
trading each month (three non-trading Sundays from January 2019;
previously two) had an estimated adverse impact on LFL sales of
c.1%. In addition, a softer market backdrop in H2 impacted annual
LFL sales by c.-1%. LFL sales of weather-related categories were up
3.4% while sales of non-weather-related categories, including
kitchen and bathroom, were up 0.8%. Gross margin % was down 100
basis points year on year reflecting higher clearance and increased
promotional activity in response to a softer market. Retail profit
decreased by 7.7% to GBP151 million reflecting sales growth offset
by a decline in gross margin and higher costs. The increase in
costs was largely driven by wage inflation, digital costs and
pre-opening costs, partly offset by lower transformation costs
.
In Romania sales increased by 6.1% (+8.8% LFL) to GBP216 million
reflecting improved and expanding ranges . The business made a
retail loss of GBP23 million for the year (FY 18/19: retail loss of
GBP16 million), largely driven by losses in the former Praktiker
stores. During the year, Romania completed the rebranding of all
former Praktiker stores to Brico Dépôt, and integrated the
business' product range, IT system and head offices. Romania plans
to consolidate its two distribution centres later this year. Space
decreased by c.7% in the year due to three store closures.
In Iberia sales decreased by 4.7% (-4.7% LFL) to GBP326 million
and the business made a retail profit of GBP2 million (FY 18/19:
retail profit of GBP2 million). In Russia sales decreased by 13.9%
(-10.8% LFL) to GBP311 million. The business reported a retail loss
of GBP12 million (FY 18/19: retail loss of GBP5 million) reflecting
a challenging business environment and two store closures. As at
the year-end, the Russian business was classified as 'held for
sale' in the Group's balance sheet. In Screwfix Germany, all 19
stores were closed during the first half of the year and the
business reported a retail loss of GBP4 million (FY 18/19: retail
loss of GBP14 million).
In Turkey, Kingfisher's 50% JV, Koçta , contributed retail
profit of GBP9 million (FY 18/19: retail profit contribution of
GBP9 million).
EMPLOYEES, STORE NUMBERS AND SALES AREA
Employees Store Sales area(1)
(FTE) numbers at 31 Jan 2020 (000s m(2) )
at 31 Jan 2020 at 31 Jan 2020
B&Q 15,812 296 2,200
Screwfix 8,804 686 44
----------------------- ----------------- ------------------------- -----------------
UK & Ireland 24,616 982 2,244
Castorama 10,679 100 1,243
Brico Dépôt 7,430 121 847
----------------------- ----------------- ------------------------- -----------------
France 18,109 221 2,090
Poland 11,518 80 690
Romania 2,309 35 253
Iberia 1,868 31 195
Russia 2,748 18 188
Other International 18,443 164 1,326
----------------------- ----------------- ------------------------- -----------------
Total 61,168 1,367 5,660
----------------------- ----------------- ------------------------- -----------------
(1) Screwfix sales area relates to the front of counter area of
an outlet
Section 5: FY 19/20 Financial review
A summary of the reported financial results for the year ended
31 January 2020 is set out below.
Financial highlights
-------------------------------------------------------------------------- --------------- ----------- -----------
2019/20 2018/19(1) % Total % Total % LFL change
change Reported change Constant Constant
currency currency
----------------------------- ----------- ----------- ----------------- ------------------- ---------------
Sales GBP11,513m GBP11,685m (1.5)% (0.8)% (1.5)%
Gross profit GBP4,255m GBP4,318m (1.4)% (0.8)%
Gross margin % 37.0% 37.0% - -
Operating profit GBP283m GBP480m (41.0)%
Statutory pre-tax
profit GBP103m GBP300m (65.7)%
Statutory post-tax
profit GBP8m GBP193m (95.9)%
Statutory basic
EPS 0.4p 9.1p (95.6)%
Interim dividend 3.33p 3.33p -
Final dividend - 7.49p n/a
Adjusted metrics
Retail profit(2) GBP786m GBP824m (4.6)% (3.9)%
Retail profit margin
% 6.8% 7.1% (30)bps (20)bps
Adjusted pre-tax
profit GBP544m GBP574m (5.2)%
Adjusted effective
tax rate 26% 27%
Net exceptional GBP(400)m GBP(204)m n/a
items
Adjusted post-tax
profit GBP400m GBP421m (5.0)%
Adjusted basic EPS 19.1p 19.8p (3.5)%
ROCE 8.6% 8.6% -
Free cash flow GBP191m GBP372m (48.7)%
Net cash (excluding GBP37m GBP84m n/a
IFRS 16 lease liabilities)
Net debt(3) GBP2,526m GBP2,542m n/a
----------------------------- ----------- ----------- ----------------- ------------------- ---------------
(1) FY 18/19 comparatives have been restated for IFRS 16
'Leases'. Refer to note 13 of the full year condensed financial
statements (in part 2 of this announcement) for detailed
restatement tables and associated commentary
(2) FY 18/19 retail profit restated to reflect the reallocation
of transformation P&L costs to country retail profits. There is
no impact on operating profit. Refer to Section 3 of this
announcement
(3) Net debt includes GBP 2.6 billion lease liabilities under
IFRS 16 in FY 19/20 (FY 18/19: GBP2.6 billion)
Total sales decreased by 0.8% on a constant currency basis to
GBP11.5 billion, with LFL sales down 1.5%. On a reported basis,
which includes the impact of exchange rates, total sales decreased
by 1.5%. During the year, total sales growth benefited from 36 net
new stores, driven by 59 Screwfix outlet openings in the UK &
Ireland, four new store openings in Poland and two new store
openings in B&Q in the UK. All 19 Screwfix outlets were closed
in Germany, three stores were closed in both France and Romania,
and two stores were closed in both Russia and B&Q in the
UK.
Gross margin % was flat as benefits from Group buying and
sourcing, and price repositioning, were offset by incremental
clearance, logistics & stock inefficiencies (largely in
Castorama France), and higher promotional activity in Q4
2019/20.
Reported retail profit decreased by 4.6% including GBP6 million
of adverse foreign exchange movement on translating foreign
currency results into sterling. In constant currency, retail profit
decreased by 3.9% with the impact of lower sales and higher
operating costs outweighing a GBP71 million reduction in
transformation costs.
Statutory pre-tax profit , which includes exceptional items,
decreased by 65.7% to GBP103 million.
We continued to invest in the business and paid GBP227 million
in cash dividends to shareholders while maintaining a strong
balance sheet.
A reconciliation from the adjusted basis to the statutory basis
for pre-tax profit is set out below:
2019/20 2018/19
GBPm GBPm Increase/ (decrease)
-------------------------------------------------------------- -------- -------- -----------------------
Retail profit 786 824 (4.6)%
Central costs (62) (69)
Share of interest and tax of joint ventures & associates (1) (7) (5)
Net finance costs (1) (173) (176)
-------------------------------------------------------------- -------- -------- -----------------------
Adjusted pre-tax profit 544 574 (5.2)%
Exceptional items before tax (441) (267)
Exchange differences on lease liabilities - (7)
-------------------------------------------------------------- -------- -------- -----------------------
Statutory pre-tax profit 103 300 (65.7)%
-------------------------------------------------------------- -------- -------- -----------------------
(1) Excludes exchange differences relating to translation of
leases denominated in non-functional currencies (e.g. USD leases in
Russia)
Net finance costs (excluding lease FX)* of GBP173 million
(2018/19: GBP176 million) consists principally of interest on IFRS
16 lease liabilities.
Exceptional items (post-tax) were GBP400 million (2018/19:
GBP204 million), as detailed below:
2019/20 2018/19
GBPm GBPm
Gain/(charge) Gain/(charge)
----------------------------------- --------------- ---------------
Transformation exceptional costs (8) (58)
Store closures (67) (124)
Russia impairments and exit costs (130) (15)
Store impairments (118) -
Romania impairments (39) -
FTA settlement and business tax (50) -
Property disposals 15 (30)
Other (44) (40)
Exceptional items before tax (441) (267)
Exceptional tax items 41 63
Net exceptional items (400) (204)
----------------------------------- --------------- ---------------
Transformation exceptional costs of GBP8 million relate to
people-related restructuring in France. Store closure exceptional
items of GBP67 million principally relate to redundancy costs. This
followed formal consultations with employee representatives
regarding the Group's plans to close 11 stores in France (of which
three closed in H2 19/20) and 19 Screwfix Germany outlets (all
closed in H1 19/20).
Exceptional costs of GBP130 million were recorded in FY 19/20
relating to our business in Russia, representing underlying store
asset write-downs, additional impairments recorded on
classification of the business as held for sale, and other exit
costs.
As a result of our financial performance in FY 19/20, we revised
the future projections for a number of stores across the Group's
portfolio. This, combined with reduced freehold property
valuations, resulted in the recognition of GBP118 million of asset
write-downs in FY 19/20 (excluding Russia and Romania), principally
relating to impairments of freehold and leasehold properties. These
have been recorded principally in Castorama France, but also
include B&Q in the UK and Iberia.
Impairments of GBP39 million have been recorded on goodwill and
certain store assets relating to the Romania business. This has
arisen due to a revision in future projections for the business,
following continued trading losses in FY 19/20.
As announced in November 2019, we reached final settlement with
the French Tax Authority (FTA) regarding the treatment of interest
paid since FY 09/10. The total settlement was GBP75 million, of
which GBP24 million was recorded as an exceptional charge (before
tax), and GBP51 million was recorded as an exceptional tax item. A
provision of GBP26 million has also been recognised in operating
profit for an uncertain position in relation to a multi-year
business tax in France.
A profit of GBP15 million was recorded on the disposal of
properties in the UK and France. Other exceptional items of GBP44
million in FY 19/20 comprise principally impairments of IT
intangible assets under development, reflecting modules of SAP and
digital tools for which no further development is currently
planned.
Taxation
Kingfisher's adjusted effective tax rate 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 territories. The adjusted effective tax
rate for the year, calculated on profit before exceptional items,
prior year tax adjustments and the impact of future rate changes,
reduced to 26% (2018/19: 27%).
The overall effective tax rate includes the impact of
exceptional items and prior year adjustments. The impact of these
increased the rate from 26% to 92%, largely reflecting the
exceptional tax charge related to the settlement with the French
Tax Authority, and the applicable tax treatment of exceptional
profit and loss items. These were offset by a release of prior year
tax provisions which reflect a reassessment of expected outcomes,
agreed positions with tax authorities and items that have
time-expired.
Pre-tax Tax 2019/20 Pre-tax Tax 2018/19
profit profit
GBPm GBPm % GBPm GBPm %
------------------------ -------- ------ -------- ------- ----- --------
Adjusted effective tax
rate 544 (144) 26% 567 (151) 27%
Exceptional items (441) 41 (267) 63
Prior year items - 8 - (19)
------------------------ -------- ------ -------- ------- ----- --------
Overall tax rate 103 (95) 92% 300 (107) 36%
------------------------ -------- ------ -------- ------- ----- --------
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
2020/21 2019/20
----------- ------------------- -------------------
UK 19% 19%
France(1) 32% 34%
Poland 19% 19%
----------- ------------------- -------------------
(1) The tax rate in France was originally expected to be 32% in
2019/20. However, the reduction was retrospectively reversed, and
the pace of future rate reductions slowed
Adjusted basic earnings per share decreased by 3.5% to 19.1p,
which excludes the impact of exceptional items and prior year tax
items. Basic earnings per share decreased by 95.6% to 0.4p as set
out below:
2019/20 2018/19
Earnings EPS Earnings EPS
GBPm pence GBPm pence
----------------------------------------------- ----------- -------- ----------- --------
Adjusted basic earnings per share 400 19.1 421 19.8
Net exceptional items (400) (18.3) (204) (9.6)
Prior year tax items 8 (0.4) (19) (0.9)
Net exchange differences on lease liabilities - - (5) (0.2)
Basic earnings per share 8 0.4 193 9.1
----------------------------------------------- ----------- -------- ----------- --------
Dividends
In light of the unprecedented uncertainty caused by COVID-19,
the Board will not propose a final dividend (2018/19: 7.49p) in
relation to FY 19/20. The Board recognises the importance of
dividends to shareholders and intends to consider the
appropriateness, quantum and timing of future dividend payments
when it has a clearer view of the scale and duration of the impact
of COVID-19 on the business.
Return on capital employed (ROCE)
In FY 19/20 Kingfisher's post-tax ROCE was 8.6%, in line with
the previous year. This compared to Kingfisher's weighted average
cost of capital (WACC) of 7.2%. The impact of a decline in profit
in all countries was offset by the impact on capital employed of
property impairments undertaken in the year.
ROCE by geographic division is analysed below:
Sales Proportion of Capital Employed Proportion of ROCE ROCE
GBPbn Group sales (CE) GBPbn Group CE 2019/20 2018/19
--------------------- -------- ------------------- ------------------- ------------------- ---------- ----------
UK & Ireland 5.1 44.4% 3.0 48.2% 13.6% 13.0%
France 4.1 35.5% 1.8 28.8% 6.0% 6.4%
Other International 2.3 20.1% 1.4 22.4% 6.7% 7.6%
Central - 0.6%
Total 11.5 6.2 8.6% 8.6%
--------------------- -------- ------------------- ------------------- ------------------- ---------- ----------
Free cash flow
A reconciliation of free cash flow is set out below:
2019/20 2018/19
GBPm GBPm
Operating profit 283 480
Exceptional items 434 267
Operating profit (before exceptional items) 717 747
Other non-cash items(1) 566 577
Change in working capital (127) 28
Pensions and provisions (33) (45)
Net rent paid (469) (463)
----------------------------------------------------- -------- --------
Operating cash flow 654 844
Net interest paid (17) (8)
Tax paid (104) (132)
Gross capital expenditure (342) (332)
Free cash flow 191 372
Ordinary dividends paid (227) (231)
Share buyback - (140)
Share purchase for employee incentive schemes (10) -
Disposal of assets and other(2) 49 (30)
Net cash flow* 3 (29)
Opening net debt (2,542) (2,678)
Movement in lease liabilities 40 157
Other movement including foreign exchange (27) 8
----------------------------------------------------- -------- --------
Closing net debt (2,526) (2,542)
----------------------------------------------------- -------- --------
(1) Includes principally depreciation and amortisation,
share-based compensation charge and pension operating cost.
(2) Includes exceptional cash flow items, principally relating
to store closures, transformation costs and French Tax Authority
(FTA) settlement.
Net debt (post-IFRS 16) as at 31 January 2020 was GBP2,526
million (2018/19: GBP2,542 million).
Operating profit before exceptional items was GBP30 million
lower than last year, largely reflecting lower profits in France
and Poland.
The working capital outflow of GBP127 million is driven by a
GBP70 million increase in stock, largely attributable to store
expansion and movements in foreign exchange rates, and a decrease
in payables of GBP114 million largely reflecting timing differences
and stock reduction initiatives, offset by a decrease in
receivables of GBP57 million due to lower rebates receivables.
Gross capital expenditure for the year was GBP342 million
(2018/19: GBP332 million). Of this, 27% was invested on refreshing
and maintaining existing stores, 11% on new stores (excluding
Screwfix), 28% on IT, 19% on transformation activities and 15% on
other areas including Screwfix expansion and supply chain
investment.
This resulted in free cash flow of GBP191 million. Disposal of
assets and other of GBP49 million include proceeds from the
disposal of assets (principally related to sale & leaseback
transactions), net of other cash outflows including store closures
and the FTA settlement. GBP227 million was returned to shareholders
by way of ordinary dividends (2018/19: GBP371 million, including
GBP140 million of share buybacks).
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 repayments of debt at its maturity and identifying an
appropriate amount of headroom to provide a reserve against
unexpected outflows. With regards to the impact of the coronavirus
crisis on cash and debt, refer to the directors' assessment of
going concern (within note 2 of the full year condensed financial
statements in part 2 of this announcement) for details of cash flow
scenario modelling.
Net debt to EBITDA
The Group ended the period with GBP2.5 billion of net debt on
its balance sheet including the recognition of GBP2.6 billion of
total lease liabilities under IFRS 16. The ratio of the Group's net
debt to EBITDA on a moving annual total basis was 2.0 times as at
31 January 2020 (2.0 times at 31 January 2019) . At this level, the
Group has financial flexibility whilst retaining an efficient cost
of capital.
Net debt to EBITDA is set out below:
2019/20 2018/19
GBPm GBPm
Retail profit 786 824
Central costs (62) (69)
Depreciation and amortisation 545 535
EBITDA 1,269 1,290
Net debt 2,526 2,542
------------------------------- -------- --------
Net debt to EBITDA 2.0 2.0
------------------------------- -------- --------
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.
Kingfisher aims to maintain its investment grade rating, whilst
investing in the business where economic returns are attractive and
(in normal circumstances) paying an annual dividend to
shareholders.
Revolving credit facilities
At 31 January 2020, the Group had undrawn revolving credit
facilities (RCFs) of GBP225 million due to expire in March 2022 and
GBP550 million due to expire in August 2022.
In May 2020, Kingfisher entered into a new committed RCF with a
syndicate of its relationship banks, comprising GBP250 million, due
to expire in May 2021.
Other borrowings
In July 2018, following a reverse enquiry, a EUR50 million
Floating Rate Note (FRN) was issued under Kingfisher's EUR2.5
billion European Medium Term Note (EMTN) programme. The note
matures in July 2020.
The Group also has two fixed term loans: EUR50 million maturing
in September 2021 and GBP50 million maturing in December 2021.
Covenants
The terms of the committed RCFs and the GBP50 million term loan
require that the ratio of Group operating profit (excluding
exceptional 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. At 31
January 2020, Kingfisher's ratio was higher than this
requirement.
Prêt garanti par l'État
In May 2020, Kingfisher arranged a EUR600 million (c.GBP535
million) term facility with three French banks in support of its
operations in France. The loan is guaranteed at 80% by the French
State ('Prêt garanti par l'État') and has a maturity of one year,
extendable for up to five years. As required under the terms of the
loan, the full amount was drawn down on 18 May 2020.
Euro Commercial Paper (ECP) programme and Covid Corporate
Financing Facility (CCFF)
The Group has recently established a ECP programme which allows
it to issue short term commercial paper for periods from one week
up to 12 months into the market to provide liquidity. The
establishment of this programme allows the Group to participate in
the CCFF, as well as access funding through standard commercial
paper issuance.
Following the UK Government's announcement on 17 March 2020, the
Group applied for the Bank of England's CCFF, which has been made
available to assist UK businesses to bridge COVID-19 related
disruption to their cash flows. The Bank of England has confirmed
that the CCFF will remain in place for at least 12 months and it
will purchase short term GBP paper from eligible companies that
make a material contribution to the UK economy.
On 12 May 2020, Kingfisher announced its eligibility to access
funding under the CCFF. On 12 June, Kingfisher issued GBP600
million of 11-month commercial paper under the CCFF.
Total liquidity
As at 12 June 2020, the Group had access to over GBP3 billion in
total liquidity, including cash and cash equivalents of c.GBP2
billion, and access to over GBP1 billion of funding under the
RCFs.
Further details of Kingfisher's debt and facilities can be found
at www.kingfisher.com .
Pensions
As at 31 January 2020, the Group had a net surplus of GBP277
million (2018/19: GBP205 million net surplus as at 31 January 2019)
in relation to defined benefit pension arrangements, of which a
GBP404 million surplus (GBP320 million surplus as at 31 January
2019) was in relation to the UK scheme. The favourable movement in
the net surplus is driven by returns on the UK scheme assets more
than offsetting the actuarial losses on the liabilities due to a
lower discount rate assumption. This accounting valuation is
sensitive to a number of assumptions and market rates which are
likely to fluctuate in the future.
Property
Kingfisher owns a significant property portfolio, almost all of
which is used for trading purposes. A valuation was performed for
internal purposes in October 2019 with the portfolio valued by
external professional valuers. Based on this exercise, on a sale
and leaseback basis with Kingfisher in occupancy, the value of
property is GBP2.9 billion as at 31 January 2020 (2018/19: GBP3.4
billion). The decrease of GBP0.5 billion in property value largely
reflects an underlying decline in property market value in France
and the UK of GBP0.3 billion, and GBP0.2 billion from property
disposals and adverse movements in foreign exchange rates.
2019/20 2018/19 2018/19 Yields
GBPbn 2019/20 Yields GBPbn
-------- -------- --------------- -------- ---------------
France 1.4 8.1% 1.8 7.4%
UK 0.6 5.8% 0.7 5.7%
Poland 0.6 7.4% 0.6 7.7%
Other 0.3 - 0.3 -
-------- -------- --------------- -------- ---------------
Total 2.9 3.4
-------- -------- --------------- -------- ---------------
This is compared to the net book value of GBP2.2 billion
(2018/19: GBP2.5 billion) recorded in the financial statements
(including investment property and property included within assets
held for sale). Balance sheet values were frozen at 1 February 2004
on the transition to IFRS.
IFRS 16 Leases
The IFRS 16 'Leases' accounting standard applies to Kingfisher
from 1 February 2019, replacing the previous standard IAS 17. The
Group has adopted the full retrospective transition option and
therefore has restated comparatives. The full year condensed
financial statements in part 2 of this announcement provides
detailed restatement tables and associated commentary.
A reminder of the nature of the principal impacts is provided
below.
Lessee accounting
For operating leases in which the Group is a lessee, the Group
recognises a new right-of-use asset and a new lease liability for
its leases of properties and equipment assets. Finance leases, rent
prepayments and accruals, and onerous lease provisions for rental
charges are derecognised under IFRS 16. Under IFRS 16 the income
statement expense comprises a straight-line depreciation charge on
the right-of-use asset and a front-loaded interest charge on the
lease liability, both over the term of the lease. For an individual
lease, this provides an overall front-loaded expense profile
compared with the straight-line rental charge recognised under IAS
17. The historical discount rates applied have been based on the
incremental borrowing rate where the implicit rate in the lease is
not readily determinable. The lease term comprises the
non-cancellable lease term, in addition to optional periods when
the Group is reasonably certain to exercise an option to extend (or
not to terminate) a lease.
Lessor accounting
There are no significant impacts for leases in which the Group
is a lessor. Where the Group subleases assets, it is determined
whether the sublease should be classified as an operating lease or
a finance lease, with reference to the right-of-use asset (not the
underlying asset as per IAS 17).
Impacts of adopting IFRS 16
-- No impact on the Group's underlying economics, cash flows or ability to pay dividends.
-- IFRS 16 impact is driven by the UK lease portfolio, given a
much higher proportion of leased stores than other geographies.
-- No impact on sales.
-- Increase in retail profit across all banners driven by the
elimination of IAS 17 rental expenses, only partially offset by the
recognition of depreciation on IFRS 16 right-of-use assets.
-- Recognition of interest charge on IFRS 16 lease liabilities
results in a broadly neutral overall impact on adjusted pre-tax
profit.
-- Exceptional items have been impacted by right-of-use asset
impairments under IFRS 16 replacing onerous lease rental provisions
under IAS 17.
-- Adjusted effective tax rate remains broadly unchanged.
-- Adjusted EPS impacts are broadly neutral, reflecting similar
impacts on adjusted earnings. Basic EPS is impacted by the change,
after exceptional items, in statutory post-tax profits.
-- No change to reported cash and cash equivalents and net movement in these.
-- Presentational changes to the cash flow statement principally
comprise the reclassification of rent paid from operating profit to
separate rental payment lines.
-- Net debt increases significantly with the inclusion of IFRS
16 lease liabilities, replacing IAS 17 finance lease liabilities.
The ratio of net debt to EBITDA ('lease adjusted net debt to
EBITDAR' under IAS 17) reduces due to lower lease liabilities than
the previous 8x rent assumption.
-- Restatement to IFRS 16 has removed the lease adjustments to
both profit and capital employed, reflecting the newly capitalised
leases. This has reduced ROCE; profit has been reduced as lease
costs are no longer added back (partially offset by higher retail
profit under the new standard) and capital employed has been
reduced as the value of capitalised leases is less than the 8x
multiplier previously assumed. As the profit impact is relatively
more significant than the capital employed impact the net effect is
a lower ROCE.
Refer to note 13 of the full year condensed financial statements
(in part 2 of this announcement) for detailed restatement tables
and associated commentary.
Section 6: Glossary
Alternative Performance Measures (APMs)
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures (APMs), also
termed 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.
The APMs have been amended where necessary to reflect the
adoption of IFRS 16 'Leases' from 1 February 2019 (with restated
comparatives). The principal changes are the inclusion of lease
liabilities within 'Net debt', the replacement of 'Lease adjusted
net debt to EBITDAR' with 'Net debt to EBITDA' as a leverage ratio,
and the exclusion of 'Lease FX' from adjusted performance
measures.
The Group no longer reports profits on an underlying basis
(refer to Section 3 of this announcement).
Closest equivalent Reconciling items
APM IFRS measure to IFRS measure Definition and purpose
Adjusted Basic earnings A reconciliation Adjusted basic earnings per
basic earnings per share of adjusted basic share represents profit after
per share earnings per share tax attributable to the owners
(EPS) is included in of the parent, before the
the Financial impact of exceptional items,
Review (Section lease FX, FFVR, related tax
5) and note 7 items and tax on prior year
of the condensed items, divided by the weighted
financial statements average number of shares in
issue during the period. The
exclusion of exceptional items,
lease FX, FFVR, related tax
items and tax on prior year
items helps provide an indication
of the Group's ongoing business
performance.
------------------- ------------------------- -------------------------------------------
Adjusted Effective A reconciliation Adjusted effective tax rate
effective tax rate to the overall is calculated as continuing
tax rate tax rate is set income tax expense excluding
out in the Financial tax on exceptional items and
Review (Section adjustments in respect of
5) prior years and the impact
of changes in tax rates on
deferred tax, divided by continuing
profit before taxation excluding
exceptional items. 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 tax
rate.
------------------- ------------------------- -------------------------------------------
Adjusted Profit before A reconciliation Adjusted pre-tax profit is
pre-tax profit taxation of adjusted pre-tax used to report the performance
profit is set of the business at a Group
out in the Financial level including both the benefits
Review (Section of our transformation programme
5) and the consolidated and the associated costs.
income statement This is stated before exceptional
of the condensed items, lease FX and FFVR.
financial statements The exclusion of exceptional
items, lease FX and FFVR helps
provide an indication of the
Group's ongoing business performance.
------------------- ------------------------- -------------------------------------------
Adjusted Profit after A reconciliation Adjusted post-tax profit is
post-tax tax of adjusted post-tax used to report the after tax
profit profit is set performance of the business
out in the Financial at a Group level. This is
Review (Section stated before exceptional
5) and the consolidated items, lease FX, FFVR and
income statement tax on those items. This also
of the condensed excludes tax adjustments in
financial statements respect of prior years and
the impact of changes in tax
rates on deferred tax. The
exclusion of exceptional items,
lease FX, FFVR and tax items
relating to prior years and
those not in the ordinary
course of business helps provide
a better indication of the
Group's ongoing after tax
business performance.
------------------- ------------------------- -------------------------------------------
Central costs No direct Not applicable Central costs principally
equivalent comprise the costs of the
Group's head office before
exceptional items. This helps
provide an indication of the
Group's ongoing head office
costs.
------------------- ------------------------- -------------------------------------------
Constant No direct Not applicable Constant currency changes
currency equivalent in total sales, LFL sales,
gross profit, gross margin
% and retail profit 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.
------------------- ------------------------- -------------------------------------------
EBITDA Profit before A reconciliation EBITDA (earnings before interest,
taxation of EBITDA is set tax, depreciation and amortisation)
out in the Financial is calculated as retail profit
Review (Section less central costs and before
5) depreciation and amortisation.
This measure is widely used
in calculating the ratio of
net debt to EBITDA, and is
used to reflect the Group's
leverage.
------------------- ------------------------- -------------------------------------------
Exceptional No direct Not applicable Exceptional items are certain
items equivalent types of income or cost that
are excluded by virtue of
their size and nature in order
to reflect management's view
of the ongoing performance
of the Group.
The principal exceptional
items are: 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; profits
and losses on the disposal
of properties and impairment
losses on non-operational
assets; and the costs of significant
restructuring, including certain
restructuring costs of the
Group's previous transformation
plan launched in 2016/17 ('transformation
exceptional costs'), and incremental
acquisition integration costs.
------------------- ------------------------- -------------------------------------------
FFVR No direct Included within FFVR (financing fair value
equivalent net finance costs remeasurements) represent
in note 5 of the fair value fluctuations from
condensed financial financial instruments.
statements
------------------- ------------------------- -------------------------------------------
Free cash No direct A reconciliation Free cash flow represents
flow equivalent of free cash flow the cash generated from operations
is set out in (excluding exceptional items)
the Financial less the amount spent on interest,
Review (Section tax and capital expenditure
5) during the year (excluding
business acquisitions and
disposals and 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
% equivalent from the supply of home improvement
products and services (excluding
VAT), less the associated
cost of those sales. Gross
margin % represents gross
profit as a percentage of
sales. It is a measure of
operating performance.
------------------- ------------------------- -------------------------------------------
Lease FX No direct Included within Lease FX (exchange differences
equivalent share of interest on lease liabilities) represents
and tax of joint the income statement impact
ventures and associates of translating lease liabilities
and net finance denominated in non-functional
costs in notes currencies (e.g. a USD denominated
3 and 5 of the lease in Russia).
condensed financial
statements
------------------- ------------------------- -------------------------------------------
LFL Sales Refer to definition LFL (like-for-like) sales
growth represents the constant
currency, year on year sales
growth for stores that have
been open for more than one
year. Stores temporarily closed
or otherwise impacted due
to COVID-19 are also included.
It is a measure to reflect
the Group's performance on
a comparable basis.
------------------- ------------------------- -------------------------------------------
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),
note 11 of the less cash and cash equivalents
condensed financial and short term deposits, including
statements such balances classified as
held for sale.
------------------- ------------------------- -------------------------------------------
Net cash No direct A reconciliation Net cash flow is a measure
flow equivalent of net cash flow to reflect the total movement
is set out in in the net debt balance during
the Financial the year excluding the movement
Review (Section in lease liabilities, exchange
5) differences and other non-cash
movements.
------------------- ------------------------- -------------------------------------------
Retail profit Profit before A reconciliation Retail profit is stated before
taxation to profit before central costs, exceptional
taxation is set items and the Group's share
out in the Financial of interest and tax of JVs
Review (Section and associates. This is the
5) and note 3 Group's operating profit measure
of the condensed used to report the performance
financial statements of our retail businesses.
------------------- ------------------------- -------------------------------------------
Retail profit No direct Refer to definition Retail profit is the Group's
margin % equivalent operating profit measure used
to report the performance
of our retail businesses and
is separately defined. 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 is the post-tax retail
equivalent profit less central costs,
excluding exceptional items,
divided by capital employed
excluding historic goodwill,
net cash and exceptional 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 (e.g.
China).
------------------- ------------------------- -------------------------------------------
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
E-commerce sales are sales derived from online transactions,
including click & collect. This includes sales transacted on
any device, however not sales through a call centre. References to
digital or e-commerce sales growth relates to growth at constant
currencies.
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 media buying,
mechanical handling equipment, printing & paper).
Iberia consists of Brico Dépôt Spain and Brico Dépôt
Portugal.
Other International consists of Poland, Iberia, Romania, Russia,
Screwfix Germany and Turkey (Koçta JV).
Sales refer to Group sales excluding Joint Venture (Koçta JV)
sales.
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 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 full year ended 31 January 2020. 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).
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" or "believe" (or the
negatives thereof) or other variations thereon or comparable
terminology. These forward-looking statements include all matters
that are not historical facts and include 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, changes in tax
rates, liquidity, prospects, growth and strategies, acts of war or
terrorism worldwide, work stoppages, slowdowns or strikes, public
health crises, outbreaks of contagious disease or environmental
disaster. By their nature, forward-looking statements involve
inherent risks, assumptions and uncertainties that could cause
actual events or results or actual performance of the Company 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 in the company's Annual Report (as published). No
representation or warranty is made as to the achievement or
reasonableness of and no reliance should be placed on such
forward-looking statements.
The Company does not undertake any obligation to update or
revise any forward-looking statement to reflect any new information
or change in circumstances or in the Company's expectations.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFLFUMESSEDM
(END) Dow Jones Newswires
June 17, 2020 02:00 ET (06:00 GMT)
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